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The Role of Carbon Market Financing Carbon Capture and Storage Projects

Dr Xi Lang, Lecturer in Business and Climate Change - University of Edinburgh

Thursday 13 June 2013, 1400-1500
LEC Training Rooms 1 And 2

Xi's talk will start by introducing the role of carbon market in financing Carbon Capture and Storage (CCS) power plants. Then he will present the findings of a study on assessing the value of upgrade in CCS power plants.

Abstract:

Significant research and development is currently being undertaken to deploy suitable carbon capture technologies for power generation and the technical performance is expected to improve significantly throughout their deployment. The option to upgrade a CCS power plant with new improved technology may therefore provide additional benefits to an initial investment in CO2 capture, and reduce the cost of generation throughout the operating life of a power plant. This paper identifies an analytical framework to evaluate the value of the upgrade option for a generic case study of an 827MW generic ultra-supercritical pulverised-coal fired (USCPC) power plant with post-combustion capture. Instead of being incentivised by an emission trading regime or a carbon tax, the CCS investment in this generic study is assumed to be solely driven by a hypothetical mandatory regulation of an 87.5% CO2 capture ratio. In theory, an upfront investment to plan and design a plant to allow for future upgrade would be economic, if the cost of the upfront investment were less than the value of the capture option. We also identify potential strategies to manage the upgrade options. Through a Monte-Carlo simulation for the hypothetical and generic case study, we found that an upgrade option for this case study CCS project would be worth US$311 million and reduce the mean levelised cost of electricity by $2.75/MWh under a 94% progress ratio scenario. In this study, it is almost certain (95% chance) that this plant would be upgraded twice, but only a very small chance of a third upgrade (9.5%) through its lifetime.

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