Cost Effectiveness of Carbon Capture-Ready Coal Power Plants with Delayed Retrofit
FCN Working Paper No. 8/2010
36 Pages Posted: 22 Dec 2010
Date Written: December 2010
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: Suggested Citation