Defining CCS Ready: An Approach to An International Definition

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Appendix C: Policy Considerations and Assessments of CCS Ready Economics• Reference Plant (Not CCS Ready) – A business-as-usual (“BAU”) plant with noanticipation of future carbon capture controls. The plant is a nominal 600 MWsupercritical PC. Although no specific space and tie-ins are provided in this plant, aretrofit is assumed to be reasonably possible.• Option 1 (Throttle valve case) – Along with the minimum essential capture readysteps, such as ensuring enough land and building space, the only major expense for thisoption is the front-end engineering design (FEED) work to plan for retrofitting an aminebasedcarbon capture system, with a provision for incorporation of a throttle valve,ducting, and extraction steam piping to the amine reboiler.• Option 2 (Clutch case) – The second option has a FEED and the incorporation of aclutch between the two low-pressure steam turbine stages. With 50% steam extractionfor the amine reboiler, declutching the second low pressure steam turbine stage fromoperation would improve heat rate performance.• Option 3 (Oversize case) – Option 3 increases the size of the steam furnace suchthat there is no loss in electric output capacity (MWe) compared with after a captureretrofit. All downstream systems are upsized as well to accommodate both the increasein steam flow as well as flue gas. Before retrofitting, the boiler is assumed to operate atpartial load with no heat rate penalty.To account for uncertainties in future CCS technologies, two CCS retrofit options arerepresented in addition to a “no CCS retrofit” option. The “current” capture technology isan amine solvent and the “advanced” case is an unspecified solvent process that requiresone-half of the energy used for current amine solvent regeneration.C.4.2 Decision Criteria for CCS RetrofitIn the Monte Carlo analysis the option to retrofit the plants to current CCS technology(and, if available, the advanced CCS technology) is evaluated in each operating year based onthe principle of profit maximization by the plant developer. If the discounted net presentvalue of the plant can be increased by the CCS retrofit, then retrofit is assumed to takeplace that year. Because the plants are modelled as having a maximum life of 41 years,retrofit costs must be recovered between the retrofit year through the year 2055. Thedecision between current and advanced CCS technologies is assumed to be made“myopically” based only on whether or not the advanced technology exists in the retrofityear. In other words, the power plant owner does not know the advanced CCS technologyis coming until after it arrives.A key determinant of when the retrofit will take place is the assumed CO 2 allowance price.Sufficient economic incentive for retrofit may be provided as the allowance priceapproaches or exceeds the per-unit-abated total cost (i.e. $/tCO 2 e) of the CCS retrofitincluding all money-forward capital and operating costs. This per-unit-abated economicindicator is “approximate” because the process of retrofit likely will increase plant dispatch(capacity utilization) and may increase operating life by dropping the variable operating costof the power plant (chiefly because the CO 2 allowance cost then will be paid for 90 percentfewer CO 2 emissions) 154 Because the hours dispatched and operating life of the plant mayincrease after CCS retrofit, the economic measure of $/tCO 2 e abated versus allowance154 If the Monte Carlo example were done for a jurisdiction that has severe electricity supply shortages, then the retrofit ofthe plant to CCS might not be modeled as increasing capacity utilization.23 February 2010 108
Appendix C: Policy Considerations and Assessments of CCS Ready Economicsprice may not be a full measure of retrofit economics and so the increase to net presentvalue of the plant is used as the criteria for the retrofit decision.C.4.3 Estimates for a General GHG Policy and Cost of GHG EmissionsThe probability distributions of some of the key inputs for the Base Case are shown in ExhibitC-2. All prices are in real U.S. dollars. One of the most important inputs is the year in whichgeneral GHG restrictions come into force. Assumptions for this parameter must be made bypolicymakers based on their best judgement of the likely outcome of political and regulatoryprocesses in their own jurisdictions. For theBase Case illustration for a new coal-fired USpower plant, GHG restrictions are assumedto begin as early as year 2016, with a 10%probability of beginning in that year. Thecumulative probability of GHG restrictiongoes up in each successive year, reaching100% in 2025. This cumulative probabilitydistribution for the start date of GHGrestrictions is shown as the in the first charton the second row of Exhibit C-2.Examples of Computer Models ThatAnalyse GHG Policies and Economics• Integrated Planning Model (IPM)-Plus, ICF International• Emissions Predictions and Policy Analysis (EPPA) Model(EPPA), MIT• Applied Dynamic Analysis of the Global Economy (ADAGE)Model, RTI International• Mini-Climate Assessment Model (MiniCAM), Joint GlobalChange Research Institute (PNNL)• MARKAL, Brookhaven National LabThe cost of emitting one metric ton of CO 2 (this can be interpreted as the expected valueof an allowance price under a cap and trade system or as a CO 2 tax) is assumed to start atabout $12/metric ton in the first year of restrictions, reach $30/metric ton about 15 yearslater and continue to rise to $150/metric ton after about 40 years. For the Base Case theexpected value of allowances is $21.77/metric ton in 2030 and $102.64/metric ton in 2050.The probability distribution for allowance prices in those two years is shown in the secondchart on the second row of Exhibit C-2. The assumptions for the range of allowances priceswould typically be determined by policymakers through analysis of computer models thatanalyse energy supply and demand and GHG policies and economics. One such model isICF’s IPM-Plus. This model and examples of other models are listed in the text box above.C.4.4 Estimates for Future Fuel and Electricity PricesIn the Monte Carlo analysis the price of fuels and electricity should be drawn fromdistributions that maintain a logical relationship among all prices. Most US regions havewholesale electricity prices which are determined for most hours in the year by the dispatchcosts of marginal natural gas-fired power plants. Therefore, in the Monte Carlo analysis theelectricity prices are modelled primarily as a function of natural gas prices with additionalinfluences from allowance prices, coal prices and a random variable representing otherelectricity market factors. For the Base Case illustration, in the year 2030 the expectedvalue of natural gas prices are about $7.50 per MMBtu and those of coal are $1.90 perMMBtu. In the year 2050 the expected value of natural gas prices are about $9.00 perMMBtu and those of coal are $2.10 per MMBtu. These fuel prices are stated before anyGHG allowance related to their use is factored in. The distributions for natural gas and coalprices are shown for the year 2030 and 2050 in the first row of Exhibit C-2.The new power plant is assumed to have revenues based on the prevailing wholesaleelectricity prices and the number of hours it can be dispatched given those prices and thevariable cost of dispatch (fuel costs plus variable O&M plus GHG allowance cost). The off-23 February 2010 109
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Defining CCS Ready: AnApproach to A
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PrefacePrefaceThe Global CCS Instit
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Acknowledgements and CitationsThe c
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Executive SummaryThe components spe
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Executive SummaryExhibit ES-3: Illu
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Chapter 1: IntroductionDevelopers o
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Chapter 1: Introductionor more, lic
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Chapter 1: Introductionrelatively n
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Chapter 1: IntroductionExhibit 1-3:
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Chapter 1: IntroductionJustificatio
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CO2 Transport Ready PlantExhibit 1-
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Chapter 2: Capture Ready Plant Defi
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Chapter 3: Transport Ready Plant De
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3.3.2 Environmental, Safety, and Ot
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Chapter 4: Storage Ready Plant Defi
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• Site DesignChapter 4: Storage R
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Page 139 and 140: Appendix E: ReferencesNational Coal
Page 141 and 142: Appendix E: Referencesfrom http://w
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