Macquarie Asset Management (MAM) portfolio company Cleco operates an electricity distribution network that serves approximately 290,000 customers in the state. Its 600 MW electric generation unit, known as Madison 3, is the largest of its fleet. However, it is fuelled predominantly by petroleum coke – a waste product of oil reﬁning – alongside coal sourced from the Illinois Basin. The plant is the largest emitter of CO2 by a utility in the state, emitting between 3-4 million tonnes of CO2 per year.2 Alongside its other coal and gas-fired power stations, Cleco is aware that its Madison 3 unit poses a challenge to achieving its goal to reduce total GHG emissions by 60 per cent by 2030.3
Pursuing CCS technology – which captures CO2 emissions and stores them underground to prevent their release into the atmosphere – presents an opportunity for Cleco to significantly decarbonise its Madison 3’s operations, while preserving and expanding local employment. The plant’s low sulphur emission rates, which are necessary for carbon capture efficiency, along with the availability of electricity and steam to support the carbon capture process, make its Madison 3 unit a good candidate for CCS. Furthermore, there are geological formations suitable for permanent carbon sequestration directly below the plant, meaning there is no need for Cleco to invest in costly pipelines to transport the CO2.
Additionally, the business case for investing in CCS technology recently became more attractive as a result of the United States’ Inflation Reduction Act, which provides tax credits4 for qualified facilities capturing and disposing of CO2.
In April 2022, MAM helped Cleco submit a grant application which successfully secured $US9 million to help finance a two-year Front-End Engineering Design (FEED) study. The project, known as Diamond Vault, is expected to be one of the first projects in the US to capture CO2 emissions from a power plant and sequester them in geological formations onsite.
The FEED study is designed to scope out Project Diamond Vault’s contract, design and construction requirements. The process consists of four phases: feasibility, technology selection, pre- and initial-FEED, and finalised FEED. The feasibility phase commenced in July 2022 and the project is currently in pre- and initial-FEED phase which began in March 2023. The finalised FEED is expected to reach completion later in 2024 and, if successful, Cleco will retrofit its existing Madison 3 plant from 2025 and target commercial operation to commence in 2028.
Project Diamond Vault is expected to help decarbonise energy production in a state that has built its economy around carbon. In Louisiana, we have the natural resources, the ingenuity, the geology, the people and the infrastructure to transform the power industry as we know it.”
President and Chief Executive Officer