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Cost Effectiveness of Carbon Capture-Ready Coal Power Plants with Delayed Retrofit

  • Rohlfs, Wilko

    ()

    (Chair of Heat and Mass Transfer, Faculty of Mechanical Engineering, RWTH Aachen University)

  • Madlener, Reinhard

    ()

    (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)

In this paper we investigate the cost effectiveness of coal-fired CCS plants. Two different model approaches are used. First, we consider marginal costs to determine the impact of fuel and CO2 certificate prices on electricity generation cost. Second, we apply a net present value evaluation to identify the main factors influencing the NPV, using projections for the price of electricity and CO2 as well as the costs of capturing, transporting and storing CO2. The NPV assessment shows that the threshold price of CO2 is highly sensitive with respect to the electricity price. Incorporating the possibility to postpone the CCS investment leads to much higher threshold prices, rendering the investment less attractive from today’s perspective. Finally, with a risk-adjusted discount rate for all CCS options it turns out to be more attractive than with a predefined discount rate of 10%, providing evidence that typical practitioner’s assumtions may indeed be too pessimistic.

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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 8/2010.

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Length: 30 pages
Date of creation: Aug 2010
Date of revision: Dec 2010
Handle: RePEc:ris:fcnwpa:2010_008
Contact details of provider: Web page: http://www.eonerc.rwth-aachen.de/fcn
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  1. Lang, Joachim & Madlener, Reinhard, 2010. "Relevance of Risk Capital and Margining for the Valuation of Power Plants: Cash Requirements for Credit Risk Mitigation," FCN Working Papers 1/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  2. Harmsen - van Hout, Marjolein J.W. & Herings, P. Jean-Jacques & Dellaert, Benedict G.C., 2010. "The Structure of Online Consumer Communication Networks," FCN Working Papers 3/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  3. Harmsen - van Hout, Marjolein J.W. & Dellaert, Benedict G.C. & Herings, P. Jean-Jacques, 2010. "Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences," FCN Working Papers 5/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
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