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Impact of CCS on the Economics of Coal-Fired Power Plants: Why Investment Costs Do and Efficiency Doesn’t Matter

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  • Lohwasser, Richard

    ()
    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Madlener, Reinhard

    ()
    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

Abstract

In this paper we analyze how development of the economics related to CCS technology in coal-fired power plants affects market diffusion. Specifically, we (1) show the (significant) variance in economic expectations for commercial-grade CCS hard coal power plants observed in selected recent scientific publications; (2) analyze the impact of economic factors related to CCS on electricity generation costs; and (3) study possible deployment of CCS technology in Europe using the bottom-up electricity sector model HECTOR. Simulation results show that investment costs strongly influence the market deployment of coal-fired CCS power plants, leading to a share of 16% in European generation capacity by 2025 with the lowest observed investment costs of 1400 €/kW, but only 2% with the highest of 3000 €/kW. A variation of conversion efficiency between 37% and 44%, the minimum and maximum observed values, only leads to a share of CCS-equipped power plants between 13 and 15%. These findings are robust for the Base Case with a CO2 price of 43 €/t and also for sensitivities with 30 and 20 €/t CO2, but with a lower effect, as the overall share of CCS is significantly reduced at these prices.

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Bibliographic Info

Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 7/2009.

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Length: 29 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:ris:fcnwpa:2009_007

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Keywords: Electricity market; simulation; model; CCS; power plant economics; technology adoption;

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  1. Johnson, Timothy L. & Keith, David W., 2004. "Fossil electricity and CO2 sequestration: how natural gas prices, initial conditions and retrofits determine the cost of controlling CO2 emissions," Energy Policy, Elsevier, vol. 32(3), pages 367-382, February.
  2. Riahi, Keywan & Rubin, Edward S. & Schrattenholzer, Leo, 2004. "Prospects for carbon capture and sequestration technologies assuming their technological learning," Energy, Elsevier, vol. 29(9), pages 1309-1318.
  3. Martinsen, Dag & Linssen, Jochen & Markewitz, Peter & Vogele, Stefan, 2007. "CCS: A future CO2 mitigation option for Germany?--A bottom-up approach," Energy Policy, Elsevier, vol. 35(4), pages 2110-2120, April.
  4. Lohwasser, Richard & Madlener, Reinhard, 2009. "Simulation of the European Electricity Market and CCS Development with the HECTOR Model," FCN Working Papers 6/2009, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  5. Unruh, Gregory C., 2002. "Escaping carbon lock-in," Energy Policy, Elsevier, vol. 30(4), pages 317-325, March.
  6. Unruh, Gregory C., 2000. "Understanding carbon lock-in," Energy Policy, Elsevier, vol. 28(12), pages 817-830, October.
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Citations

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Cited by:
  1. Kraas, Birk & Schroedter-Homscheidt, Marion & Pulvermüller, Benedikt & Madlener, Reinhard, 2011. "Economic Assessment of a Concentrating Solar Power Forecasting System for Participation in the Spanish Electricity Market," FCN Working Papers 12/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  2. Bruns, Stephan B. & Gross, Christian, 2013. "What if energy time series are not independent? Implications for energy-GDP causality analysis," Energy Economics, Elsevier, vol. 40(C), pages 753-759.
  3. Michelsen , Carl Christian & Madlener, Reinhard, 2013. "Switching from Fossil Fuel to Renewables in Residential Heating Systems: An Empirical Study of Homeowners’ Decisions in Germany," FCN Working Papers 14/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  4. Hackbarth, André & Madlener, Reinhard, 2013. "Willingness-to-Pay for Alternative Fuel Vehicle Characteristics: A Stated Choice Study for Germany," FCN Working Papers 20/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  5. Rohlfs, Wilko & Madlener, Reinhard, 2012. "Assessment of Clean-Coal Strategies: The Questionable Merits of Carbon Capture-Readiness," FCN Working Papers 18/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  6. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Challenges in the Evaluation of Ultra-Long-Lived Projects: Risk Premia for Projects with Eternal Returns or Costs," FCN Working Papers 13/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  7. Michelsen, Carl Christian & Madlener, Reinhard, 2011. "Homeowners' Preferences for Adopting Residential Heating Systems: A Discrete Choice Analysis for Germany," FCN Working Papers 9/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  8. Ghosh, Gaurav & Shortle, James, 2012. "Managing Pollution Risk through Emissions Trading," FCN Working Papers 1/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  9. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "An Evaluation of Attribute Anchoring Bias in a Choice Experimental Setting," FCN Working Papers 6/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  10. Bernstein, Ronald & Madlener, Reinhard, 2011. "Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis," FCN Working Papers 8/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  11. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "The Impact of Green Framing on Consumers’ Valuations of Energy-Saving Measures," FCN Working Papers 7/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  12. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Optimal Power Generation Investment: Impact of Technology Choices and Existing Portfolios for Deploying Low-Carbon Coal Technologies," FCN Working Papers 12/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  13. Hackbarth, André & Madlener, Reinhard, 2011. "Consumer Preferences for Alternative Fuel Vehicles: A Discrete Choice Analysis," FCN Working Papers 20/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  14. Dergiades, Theologos & Madlener, Reinhard & Christofidou, Georgia, 2012. "The Nexus between Natural Gas Spot and Futures Prices at NYMEX: Do Weather Shocks and Non-Linear Causality in Low Frequencies Matter?," FCN Working Papers 17/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Sep 2013.
  15. Rohlfs, Wilko & Madlener, Reinhard, 2011. "Multi-Commodity Real Options Analysis of Power Plant Investments: Discounting Endogenous Risk Structures," FCN Working Papers 22/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  16. Palmer, Johannes & Sorda, Giovanni & Madlener, Reinhard, 2013. "Modeling the Diffusion of Residential Photovoltaic Systems in Italy: An Agent-based Simulation," FCN Working Papers 9/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

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