A foolproof guide to the Dept. of Energy’s CDR purchase prize

Details on the $35 million carbon removal purchase

As many of you know, The Department of Energy (DOE) recently announced the Commercial CDR Purchase Pilot Prize. This is the first federal procurement initiative for carbon removal we’ve seen and it won’t be the last.

The prize is part of DOE’s Carbon Negative Shot and funded by the Bipartisan Infrastructure Law, which authorized up to $115 million for DAC Prize Competitions. This particular prize will award up to $35 million to suppliers that deliver independently verified, US-based carbon removal to DOE. All of this is led by DOE’s Fossil Energy and Carbon Management (FECM), alongside the National Renewable Energy Laboratory (NREL) as prize administrator and National Energy Technology Laboratory (NETL) as support in issuing the prize.

Importantly, this Prize supports a diverse carbon removal portfolio, selecting projects that can deliver robust life-cycle analysis and net-negative emissions. It’s a clear effort to lower the cost of overall carbon removal, provide an early customer in government, and set a high bar — pillars we believe in, too. Pathways eligible for the prize include DAC with storage, enhanced weathering or mineralization, BiCRS, and managed carbon sinks that are not defined in the above categories.

You might not have had a chance to pore over the pages of the prize, but we have — so we’re sharing our notes and interpretation below.

What Companies Will Need to Apply

• CDR offering: Ability to deliver a minimum volume (>3,000 net CO2 tons total) with an expected delivery schedule (within 3 years of delivery commencement with annual progress reviews). DOE wants to know what inputs you’ll need to achieve this, the scale and capacity of your project, and disclosure of other financial assistance and incentives (e.g. tax credits, grants, revenue)
• Independently verified removal: Applicants will need to submit greenhouse gas (GHG) accounting and monitoring, reporting and verification (MRV) protocols/methodologies on a cradle-to-grave basis. DOE is also vetting MRV providers along with this process.
• Societal considerations and impacts: Applicants will need to submit a Community Benefits Plan (CBP) detailing input from local communities, considerations of diversity, equity, inclusion, and accessibility and workforce proposals
• Additionality: Demonstrate net removal of CO2 that would not have occurred without DOE’s purchase
• Scalability: DOE will assess whether there is a feasible path and timeline to scale to 1 gigaton per year with mitigation strategies for identified risks
• Secure storage: Applicants will need to show proven capacity to permanently isolate carbon from the atmosphere including life-cycle-analysis; measurement and ongoing stewardship plans throughout the durability term; and safeguards and mechanisms to address and rectify the reversal of carbon storage (e.g. buffer pools, insurance, claw-back)

Key Deadlines

• October 24, 2023: Informational webinar at 2pm ET
• October 31, 2023: Deadline for public comment on prize rules for Phases 2 & 3. These should be submitted at 2 pages maximum, single-spaced, 12 font to dacprizes@nrel.gov
• November 30, 2023: Phase 1 submission deadline at 5pm ET via the HeroX portal

Infographic: Carbon Removal Alliance

Phase 1: Carbon Removal Credit Concept Proposal

Up to 25 teams awarded $50,000 each

This prize is compounding, meaning winners from each phase both receive an award and gain the ability to apply to the next phase. Phase 1 is a concept proposal, with applicants projecting and anticipating future project needs. Applicants are required to submit the following:

• Quoted price and total net annual removals available to DOE and other buyers, preferably for the specific project
• CDR technology costs and project’s techno-economic assessment, including operational and capital costs per net ton of CO2 removed
• Life cycle assessment with estimated cradle-to-grave emissions
• Proposed MRV methodology or development process and independent MRV implementation partner(s)
• Anticipated permanence, including risk of reversal and durability assurance plans
• A project development timeline, finance, and implementation plan
• Outline of a pathway to gigaton deployment and cost declines
• Strategic overview of how the applicant will develop Community Benefits Plan
• Disclosure of all current or future CDR purchase agreements and deliveries to date
• Letters of commitment or support from partners, potential/past buyers, investors, community groups, MRV providers, and labor groups may be submitted (this is optional but we recommend it)

This phase will be selected based on project overview and capabilities (weighing 70%), technology and project development (weighing 30%), and network, team, and resources (weighing 10%).

It’s worth noting that the next sets of requirements aren’t binding right now — DOE is accepting public comment on phases 2 and 3 through October 31st which could be incorporated in the intervening months. Below, we’ve highlighted what is currently proposed.

Phase 2: Detailed Design of CDR Contract Offering

Up to 10 teams awarded $375,000 each

Phase 2 moves from concept to planning, with applicants deepening their proposal details on community benefits, MRV, and siting. Winners of phase 1 will be able to apply, submitting the following (some of which are updates to their Phase 1 proposal)

• A detailed design of CDR contract offering
• Progress on CBP based on community engagement and feedback
• Progress on an MRV framework and methodology, including commitment from a DOE-approved third-party MRV service provider
• Status of permitting and site agreements
• Revisions of LCA estimates, inputs, and modeling parameters
• Binding commitments from non-federal entities to purchase carbon removal (e.g. letters of support, signed agreements)
• Up to two buyers letters of reference from entities who have purchased or committed to purchasing CDR

Phase 2 will be selected based on the contract summary (weighing 50%), MRV implementation partner and methodology (weighing 25%), and the customer discovery & market development (weighing 25%). DOE may also conduct interviews with suppliers at the prize administrators’ discretion.

Phase 3: Carbon Removal Credit Delivery

Up to 10 teams awarded a maximum $3 million each, with the amount determined by the final volume of verified carbon removal delivered to DOE.

Phase 3 is all about delivery. Phase 3 is eligible only for phase 2 winners and begins once a purchase contract with DOE has been agreed upon by both parties. Again, MRV and CPBs will be evaluated, and these finalists should demonstrate additional purchases by other buyers as well as submit a complete Technology Maturation Plan.

With a contract in place, finalists will have 12 months to deliver and independently verify their first single ton of CO2 removed. Following initial delivery, suppliers have up to 36 months to deliver the complete volume of carbon removal they’ve committed. All of these tons will be verified by a third-party, DOE-approved MRV partner and independently documented. On a case-by-case basis, DOE program administrators may conduct interviews or perform site visits.

This phase will be selected based on the carbon removal delivery documentation (weighing 50%), fulfillment of independent MRV (weighing 20%), fulfillment of a CBP (weighing 20%), and progress towards additional delivery to other purchasers (weighing 10%).

While you’re busy gathering application materials…

…We’ll be working with DOE to ensure that prize administration meets the needs of the CDR community. Our goal is to make sure that DOE is funding the highest quality carbon removal projects with timelines and program requirements that align with the capabilities of the industry. These purchases will have a significant impact beyond their tonnage — the standards set for this prize will influence government procurement and private sector carbon removal purchases for years to come.

Over the last couple of weeks, whether at carbon removal conferences or on coalition calls, we’ve heard questions bubble up across the ecosystem about the prize, and we’re helping CRA member companies navigate those. On our minds — and many of yours — is MRV (how DOE will select verifiers for these projects) and additionality (how are the tons being counted in the broader climate ledger). That’s why we encourage everyone to submit feedback to DOE so they operate with the best possible view of the ecosystem and administer a highly consequential first carbon removal procurement program.

If you’re building carbon removal, come talk to us. This is an abridged version of our memo supporting CRA members as they apply for DOE funding.