Determinants of the Costs of Carbon Capture and Sequestration for Expanding Electricity Generation Capacity

29 Pages Posted: 18 May 2009

See all articles by Emily Giovanni

Emily Giovanni

Indiana University, School of Public and Environmental Affairs

Kenneth R. Richards

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); University of Oxford - Oxford Martin School

Date Written: April 20, 2009

Abstract

The carbon capture and sequestration (CCS) literature to date lacks a comprehensive economic analysis. Our study addresses this need. It models the costs of the entire process, from generation at the power plant to carbon injection at the reservoir, examining the economic factors that affect technology choice and CCS costs. We consider three major fossil fuel generating technologies, each with and without CCS. Our results suggest that natural gas and coal prices have profound impacts on the carbon price needed to induce CCS. Previous cost modeling approaches do not capture this complexity. Therefore, we developed a cost region graph that models technology choice as a function of carbon and fuel prices. Generally, the least‐cost technology at low carbon prices is pulverized coal, while intermediate carbon prices favor natural gas technologies and high carbon prices favor coal gasification with capture. However, the specific carbon prices at which these transitions occur is largely determined by the price of natural gas. For instance, the CCS-justifying carbon price ranges from $100/t C at high natural gas prices to $200/t C at low natural gas prices. This result has important implications for potential climate change legislation. Additionally, our analysis informs the relative importance of other variables. Capital costs are highly important, as reflected by the impact of the Energy Policy Act of 2005, which substantially lowers the justifying carbon price and favors coal technologies. Pipeline distance and reservoir type have smaller impacts overall, but highlight the heterogeneity of costs across industry.

Keywords: carbon capture and sequestration, carbon capture and storage

Suggested Citation

Giovanni, Emily and Richards, Kenneth R., Determinants of the Costs of Carbon Capture and Sequestration for Expanding Electricity Generation Capacity (April 20, 2009). Available at SSRN: https://ssrn.com/abstract=1403249 or http://dx.doi.org/10.2139/ssrn.1403249

Emily Giovanni

Indiana University, School of Public and Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Kenneth R. Richards (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

University of Oxford - Oxford Martin School

United Kingdom

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