Financing model for power plants
with CCS
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
Johannesburg May 31-June 1, 2011
Nataliya Kulichenko, World Bank Energy Anchor
Motivation and background
 Part of regional study “Carbon Capture and Storage:
Regional Perspectives in developing countries”
 Adding CCS to a power plant will make electricity
more expensive
 Objective is to investigate:
 How much more expensive power from coal plants
with CCS is compared to without CCS
 Different ways that power plants with CCS in
developing countries can be financed
 How concessional finance can impact electricity price
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Method
 Calculate how different financing structures can
effect levelized cost of electricity (LCOE)
 Calculate impact of concessional financing on LCOE
 Find level of concessional financing necessary to
lower LCOE from plant with CCS, to plant without
CCS (capped at 50% project finance)
 Explore for various scenarios to investigate under
which conditions CCS is least expensive (LCOE)
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Scenarios
 Coal price
 Low 1$/mmbtu
 Medium 3$/mmbtu
 High 5$/mmbtu
 Revenues from CO2 permits
 0 $/ton
 15 $/ton
 50 $/ton
 Revenues from enhanced hydrocarbon recovery
 Oil (EOR)
 Coal bed methane (ECBM)
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Assumptions
 Technologies examined, 0%, 25% 90%
capture
 Pulverized coal, wet and dry cooled
 IGCC, wet and dry cooled
 Oxy-fuel wet cooled
 Cost developed based on NETL
feasibility study on IGCC plant in
India and estimates of costs of a coal
plant in South Africa
 Costs of CCS components developed
through literature review and expert
consultation
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
EOR assumptions
 Max recovery rate 3.5 bbl/ton CO2 injected
 1Mt/year stored
 Lasts for 10 years
 CO2 recycled (80% of injected CO2 is recycled by
year 10)
 Upfront development costs approx $180m
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
ECBM assumptions
 Max recovery rate 0.317 tons gas/ton CO2 injected
 1Mt/year stored
 Lasts for 10 years
 Upfront development costs approx $66m
 NB – have not assumed recycling – less data
available on ECBM then EOR to make assumptions
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
The model
 Based on Levelized cost of electricity model,
adapted version of MIT LCOE model
 The model allows for different forms of blended
financing structures
 LCOE methodology finds the price of electricity that
covers all generation cost in present value terms (i.e.
NPV of the project is equal to zero).
 Model uses weighted Average Cost of Capital (WACC)
as discount rate
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
The model
WACC = E*S + D*(1-S)
Where:
 E= Expected Return on Private Equity (%)
 D= Weighted Average Cost of Debt from various
financing sources (%)
 S= Percentage of financing that is equity
 model calculates the Internal Rate of Return
(IRR) of each financing source, and then
calculates the weighted average of all sources
(i.e.”D” above).
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Financing structures
Loans
Terms
Case 1
Case 2
Case 3
MDB loan 1
Maturity: 30 years
Grace period: 5
years
IRR: 4.85%
50%
29%
25%
MDB loan 2
Maturity: 15 years
Grace period: 3
years
IRR: 4.19%
Commercial
loan
Maturity: 15 years
Grace period: 4
years
IRR: 7.93%
Commercial
loan with
guarantee
Maturity: 15 years
Grace period: 4
years
IRR: 6.03%
Similar to IBRD
Similar to EBRD
spread of 400 bps
over LIBOR
50% cheaper than
1st commercial loan
25%
50%
Combined Debt rate for 3 cases determines the WACC
25%
71%
25%
31/5/2011
Further financial assumptions
 Assumptions reflect conditions of developing countries that
have access to MDB loans and concessional financing
 Return on equity (E): 20%
 Debt fraction: 65%
 Tax rate: 31%
 Inflation rate: 3%
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Medium coal price
Case 1: 50/50 MDB1 and commercial loans
Results
LCOE different technologies with and
without CCS
16
14
c/kWh
12
10
IGCC
PC
Oxyfuel
8
6
4
2
0
no CCS
25% capture CCS90% capture CCS
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Medium coal price
Case 1: 50/50 MDB1 and commercial loans
Results
Percentage increase in LCOE, no CCS to
90% capture CCS
70%
60%
50%
40%
30%
20%
10%
0%
IGCC
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
PC
Oxyfuel
31/5/2011
Medium coal price
Case 1: 50/50 MDB1 and commercial loans
Results
LCOE with different CO2 prices
16
LCOE $/MWh
14
12
10
0$/ton
15$/ton
50$/ton
8
6
4
2
0
IGCC
PC
Oxyfuel
Average decrease in LCOE with 15$/ton: 6%
Average decrease in LCOE with 15$/ton: 21%
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Results
Medium coal price
Case 1: 50/50 MDB1 and commercial loans
LCOE with enhanced hydrocarbon recovery
16
14
LCOE $/MWh
12
10
None
EOR
ECBM
8
6
4
2
0
IGCC
PC
Average decrease in LCOE with EOR : 1.4%
Average decrease in LCOE with ECBM : 1.2%
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
Oxy
31/5/2011
Medium coal price
Pulverized coal
No extra revenues
Results
c/kWh
LCOE different financing structures
16
14
12
10
8
6
4
2
0
Without CCS
MDB loan +
MDB loan + 2 MDB loans +
commercial loan guarantee +
guarantee +
commercial loan commercial
loans
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Results
Medium coal price
Pulverized coal
No extra revenues
 For all cases, applied 30% and 50% concessional
financing, to see how LCOE changes
 Concessional financing terms similar to Clean
Technology Fund terms
 Maturity: 20 years
 Grace period: 10 years
 IRR: 0.75%
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Medium coal price
Pulverized coal
No extra revenues
Results
c/kWh
LCOE different financing structures
16
14
12
10
8
6
4
2
0
No concessional
financing
30% concessional
financing
Without CCS MDB loan +
commercial
loan
MDB loan + 2 MDB loans +
guarantee + guarantee +
commercial commercial
loan
loans
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
50% concessional
financing
31/5/2011
Medium coal price
Pulverized coal
No extra revenues
Results
Percentage chance in LCOE from without CCS to
with CCS
62%
60%
58%
56%
54%
52%
50%
48%
46%
44%
No concessional financing
30% concessional
financing
50% concessional
financing
MDB loan +
commercial
loan
MDB loan + 2MDB loans +
guarantee + guarantee +
commercial
commercial
loan
loans
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Medium coal price
No extra revenues
Results
Percentage chance in LCOE from without CCS to with CCS
70%
60%
50%
40%
30%
20%
10%
0%
MDB loan +
commercial loan
MDB loan +
2MDB loans +
guarantee +
guarantee +
commercial loan commercial loans
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
PC no concessional
financing
PC 30% concessional
financing
PC 50% concessional
financing
IGCC no concessional
financing
IGCC 30% concessional
financing
IGCC 50% concessional
financing
31/5/2011
Medium coal price
No extra revenues
Results
Percentage chance in LCOE from without CCS to
with CCS
70%
60%
50%
PC
OXY
IGCC
40%
30%
20%
10%
0%
MDB loan + commercial
loan
MDB loan + guarantee + 2MDB loans + guarantee +
commercial loan
commercial loans
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Results
Medium coal price
No extra revenues
IGCC
Percentage change in LCOE from no CCS, with CO2
price
No concessional
financing, no CO2
permits
price
40%
35%
30%
25%
20%
15%
10%
5%
0%
No concessional
financing WITH
CO2price
permit
CO2
30% concessional
financing WITH
CO2
CO2 permit
price
MDB loan +
commercial
loan
MDB loan +
guarantee +
commercial
loan
MDB loan +
guarantee +
commercial
loan
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
50% concessional
financing WITH
CO2
CO2 permit
price
31/5/2011
Results
 Some cases found when concessional finance added,
LCOE of plant with CCS was LOWER than LCOE of
plant without CCS
 % of concessional finance required to reach
breakeven point where LCOEs with and without
CCS equal was found for these cases (i.e. it will be
less than 50%)
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Percent of concessional finance
required
Results
50
45
40
35
30
25
20
15
10
5
0
Percentage of concessional finance required to set LCOE with
full capture equal to without capture case (if less than 50%)
942
1,338
1,600
1,400
53
Amount of concessional finance
required (US$ millions)
409
348
316
105
1,200
1,000
800
600
400
200
0
Oxy, low Oxy, low Oxy, low
IGCC,
IGCC,
IGCC,
PC, low
coal price, coal price, coal price, medium medium medium coal price,
EOR,
ECBM,
50$/ton coal price, coal price, coal price,
EOR,
50$/ton
50$/ton
EOR,
ECBM,
50$/ton
50$/ton
50$/ton
50$/ton
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Conclusions
 PC - the highest percentage increase in LCOE with




CCS, followed by Oxyfuel, and then IGCC
CO2 price of 15 and 50$/ton - more impact on
lowering LCOE than EOR or ECBM revenues
Case 1 (50/50 share MDB & commercial loan) slightly higher LCOE than cases 2 and 3. Little
impact on LCOE
Concessional financing does lower LCOE with CCS
In some cases, less than 50% concessional finance is
needed to make LCOE with CCS equal to LCOE
without CCS
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Thank you
Natalia Kulichenko
nkulichenko@worldbank.org
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Extra slides
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Technology inputs
Input
Units
Pulverized coal wet-cooled
Full
Partial
capture
capture
No CCS
CCS
CCS
Capacity
MW
500
495
499
500
495
499
85%
85%
85%
85%
85%
85%
Capacity Factor
Pulverized coal dry-cooled
Full
Partial
capture
capture
No CCS
CCS
CCS
Heat rate
Btu/kWh
8,653
12,460
9,710
9,108
13,116
10,221
Overnight Cost
$/kW
2,163
4,048
2,944
2,253
4,211
3,061
Fixed O&M Costs
$/kW/year
30
46.2
34.5
30
46.2
34.5
Variable O&M Costs
mills/kWh
kgCO2/mmBtu
6.45
11.94
7.98
6.45
11.94
7.98
300
300
300
300
300
300
%
0%
90%
25%
0%
90%
25%
kg CO2/kWh
1.025
0.103
0.769
1.025
0.103
0.769
0
0.9225
0.25625
0
0.9225
0.25625
-
3,402,452
952,020
-
3,402,452
952,020
Carbon intensity
Capture rate
Carbon
emitted
Carbon
captured
Carbon
captured
80% increase
dioxide
dioxide
kg CO2/kWh
dioxide tonnes
CO2/year
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
31/5/2011
Technology inputs
IGCC wet-cooled
IGCC dry-cooled
Input
Units
No CCS
Full
capture
CCS
Capacity
MW
500
417
477
500
417
477
85%
85%
85%
85%
85%
85%
Capacity Factor
Partial
capture
CCS
No CCS
Full
capture
CCS
Partial
capture
CCS
Heat rate
Btu/kWh
8,989
12,405
9,938
9,016
12,172
9,893
Overnight Cost
$/kW
2,083
2,866
2,492
2,147
2,950
2,565
Fixed O&M Costs
$/kW/year
60
74.4
64
60
74.4
64
Variable O&M Costs
mills/kWh
kgCO2/mmBtu
6.00
7.80
6.50
6.00
7.80
6.50
300
300
300
300
300
300
25%
0%
90%
25%
0.769
1.025
0.103
0.769
0.25625
0
0.9225
0.25625
910,474
-
2,864,017
910,474
Carbon intensity
Capture rate
%
0%
90%
Carbon
dioxide
emitted
kg CO2/kWh
1.025
0.103
Carbon
dioxide
captured
kg CO2/kWh
0
0.9225
Carbon
dioxide tonnes
captured Carbon Capture
CO2/year
2,864,017
and Storage: Perspectives
for
the
Southern Africa Region
38% increase
31/5/2011
Technology inputs
Oxyfuel
Input
Units
No CCS
Full
CCS
Capacity
MW
500
495
499
85%
85%
85%
Capacity Factor
capture Partial capture
CCS
Heat rate
Btu/kWh
8,653
11,594
9,470
Overnight Cost
$/kW
2,163
3,810
2,944
Fixed O&M Costs
$/kW/year
30
42.6
33.5
Variable O&M Costs
mills/kWh
6.45
8.26
6.96
Carbon intensity
kg-CO2/mmBtu
Capture rate
%
0%
90%
25%
Carbon dioxide emitted
kg CO2/kWh
1.025
0.103
0.769
Carbon dioxide captured
kg CO2/kWh
0
0.9225
0.25625
Carbon dioxide captured
tonnes CO2/year
Carbon Capture and Storage: Perspectives for the
Southern Africa Region
300
-
300
3,402,452
76% increase
300
952,020
31/5/2011
Parameter
Coal price
CO2 price
Enhanced oil recovery
Values and explanation

1 $/mmbtu (Low)

3 $/mmbtu (Medium)

5 $/mmbtu (High)
The values 1 and 5 were selected as extremes, with 3 as the average
included. The low price is based on cheap domestic coal prices in
South Africa (check source – Eskom PAD?), the high price is the
price of internationally traded coal(check source – commodity
review), and the medium is the average

0$/ton

15$/ton

50$/ton
These values were selected to represent no price, a low price, similar
to prices seen in the EU ETS, and a high price on carbon, and are
consistent with the prices used for the analysis in chapter x.








Enhanced coal bed methane recovery
Carbon Capture and Storage: Perspectives for the
Southern Africa Region







1 million tons per year are injected and stored
EOR takes place for 10 years
After 10 years, CO2 is assumed to be stored in alternative site.
Capital costs are increased by $184,200,000
Assumed oil price 70$/bbl
Maximum recovery factor: 2.5 bbl/ton injected
Due to recycling, by year 10 only 50% of total CO2 injected is
from capture in the plant
The CO2 recovery schedule is given in the appendix in figure
x.
1 million tons per year are injected and stored
After 10 years, CO2 is assumed to be stored in alternative site.
EOR takes place for 10 years
Capital costs are increased by $66,000,000
Assumed gas price: 3.5 $/mcf
Maximum recovery factor: 0.317 tons gas/ton CO2 injected
The CO2 recovery schedule is given in the appendix in figure
31/5/2011
y.