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

  • 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))

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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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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  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. 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.
  3. 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.
  4. Unruh, Gregory C., 2000. "Understanding carbon lock-in," Energy Policy, Elsevier, vol. 28(12), pages 817-830, October.
  5. Unruh, Gregory C., 2002. "Escaping carbon lock-in," Energy Policy, Elsevier, vol. 30(4), pages 317-325, March.
  6. 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).
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