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

FCN Working Paper No. 8/2010

36 Pages Posted: 22 Dec 2010

See all articles by Wilko Rohlfs

Wilko Rohlfs

RWTH Aachen University - Faculty of Mechanical Engineering

Reinhard Madlener

RWTH Aachen University

Date Written: December 2010

Abstract

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 assumptions may indeed be too pessimistic.

Keywords: CCS, Capture-ready, Coal combustion, Retrofit

JEL Classification: C63, O30, Q47

Suggested Citation

Rohlfs, Wilko and Madlener, Reinhard, Cost Effectiveness of Carbon Capture-Ready Coal Power Plants with Delayed Retrofit (December 2010). FCN Working Paper No. 8/2010. Available at SSRN: https://ssrn.com/abstract=1729731 or http://dx.doi.org/10.2139/ssrn.1729731

Wilko Rohlfs

RWTH Aachen University - Faculty of Mechanical Engineering ( email )

Eilfschornsteinstr. 18
Aachen, 52056
Germany

Reinhard Madlener (Contact Author)

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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