Assessing the value of CO2 capture ready in new-build coal-fired power plants in China

AbstractChina has built at least 70 GW of new coal- fired power installed capacity annually since 2005 and the growth is expected to continue (CEC, 2008). Chinese government, industry and academic stakeholders perceive that China will not mandate new plants to be built with carbon dioxide capture and storage systems in the short term and there is little incentive even to contemplate the first steps needed to fit plants with capture equipment [Reiner, D., Liang, X., Sun, X., Zhu, Y., Li, D., 2007. Stakeholder attitudes towards carbon dioxide capture and storage technologies in China, International Climate Change Conference, Hong Kong, May 29–31 2007]. We investigate the value of making new plants CO2 Capture Ready (CCR), which would enable them to retrofit to capture CO2 without unnecessary additional costs when the appropriate policy and /or economic drivers are in place (IEA, 2007).In order to understand the value and investment characteristics of CCR in China, a typical 600 MW pulverized-coal -fired ultra-supercritical power plant, locating at Guangdong province, was examined. Combined with a detailed engineering assessment, we obtained the costs for different CCR scenarios. To analyze CCR investment opportunities, we apply a cash flow model for valuing Capture Options, as developed in [Liang, X., Reiner, D., Gibbins J., Li J., 2007. Fianncing CCR coal-fired power plants in China by issuing capture options, EPRG Working Paper Series, EPRG0728, Cambridge, December. Available at: www.electricitypolicy.org.uk/pubs/wp/eprg0728.pdf]. Results are obtained by Monte-Carlo simulation, based on engineering surveys and the IEA (2007) CCR study, as well as plant performance information and expert projections on carbon prices, coal prices and electricity prices.CCR investments are justified by factors such as higher retrofitting probabilities, lower early-closure probabilities and fair economic return. However, the economic case for CCR largely depends on the type of investments made, for example, CCR-essential investments tend to be more economic than additional non-essential CCR features such as CCR Essential with clutched low-pressure turbines. Carbon price, coal price and discount rate also were found to have significant impacts on the economics of CCR. Overall, it appears that the value of capture options are significant, and therefore clear retrofitting strategies would be valuable for any CCR investment