Thursday, June 7, 2012

Economics of Carbon Capture and Storage (CCS) for coal plants: Impact of investment costs and efficiency on market diffusion in Europe

Abstract:In this paper, we analyze how the development of the carbon capture and storage (CCS) technology used in coal-fired power plants affects its market diffusion. Specifically, we (1) show the significant variance in expectations about the economics of commercial-grade CCS hard coal power plants observed in the literature; (2) analyze the impact of CCS economics on electricity generation costs; and (3) investigate the expected deployment of CCS in the European power sector, depending on the variance of two main factors, efficiency and investment cost, using the bottom-up electricity sector model HECTOR. Simulation results show that investment costs strongly influence the market deployment of coal-fired CCS power plants, leading to a share of 16% in European generation capacity by 2025 with the lowest observed investment costs of 1400 €/kW, but only 2% with the highest of 3000 €/kW. A variation of conversion efficiency between 37% and 44%, the minimum and maximum observed values, only leads to a 13–15% share variation of CCS-equipped power plants. These findings are robust for the Base Case with a CO2 price of 43 €/t and also for sensitivities with 30 and 20 €/t CO2, but with a lower effect, as the overall share of CCS is significantly reduced at these prices.


► Model-based study of prospects of CCS for coal power plants in 19 European countries.
► Investment cost strongly affect deployment, while efficiency only has a modest impact.
► Lowest (highest) investment cost observed lead to total CCS share of 16% (2%) by 2025.
► Highest (lowest) conversion efficiency observed results in CCS share of 15% (13%).
► Findings are robust for various CO2 price and fuel price developments.

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Fig. 2. Installed total generation capacity development across all model regions, Base Case.
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Fig. 3. Share of European CCS capacity in 2025 (in %) as a function of specific investment costs.
by Richard Lohwasser and Reinhard Madlener both of the Institute for Future Energy Consumer Needs and Behavior (FCN), School of Business and Economics/E.ON Energy Research Center, RWTH Aachen University, Mathieustrasse 6, 52074 Aachen, Germany; Tel.: + 49 89 5594 3190; fax: + 49 89 5594 3191.
Energy Economics
Volume 34, Issue 3; May, 2012; Pages 850–863 
Keywords: Electricity market;Simulation model; CCS; Power generation; Technology adoption

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