The CCS paradox: The much higher CO2 avoidance costs of existing versus new fossil fuel power plants.

Abstract: CO₂ avoidance cost economics are an essential tool for analysis of the potential for future CO₂ capture and storage (CCS) utilization. The CO₂ avoidance cost is the CO₂ tax at which the product cost is the same for either a fossil fuel plant without CO₂ mitigation (but paying the CO₂ tax) or the same fossil fuel plant that includes the added capital and efficiency losses of adding CCS (but avoiding most of the CO₂ tax). The CO₂ tax must be higher than this CO₂ avoidance cost to justify the higher risks, capital, and lower efficiency of utilizing CCS. Understanding which issues impact CO₂ avoidance costs the most is fundamental to economically encouraging the massive CO₂ reductions enabled with CCS. SFA Pacific recently completed two similar economic analyses of coal-based power plant CO₂ mitigation costs. Both analyses included the options of converting to lower CO₂ emissions with natural gas (with and without CCS) and continued coal use with and without CCS. One analysis was for an existing coal-based power plant baseline as part of a Massachusetts Institute of Technology (MIT) Workshop and Report entitled Retrofitting of Coal-Fired Power Plants for CO₂ Emissions Reductions . The second analysis was for a new coal-based power plant baseline as part of an analysis of CO₂ mitigation options by the U.S. Business Roundtable entitled The Balancing Act: Climate Change, Energy Security and the U.S. Economy . However, the resulting CO₂ avoidance costs for these two analyses were very different. Specifically, the CO₂ avoidance cost was about twice as high for the existing coal power plant than for the new coal power plant baseline. There are basic technical and economic reasons for this big difference in CO₂ avoidance costs. They are best explained by simply showing the costs and performance of each baseline without and then with CCS in simple, transparent, and consistent one-page models. This enables easy, insightful side-by-side direct comparisons. Since first developing a cost and performance economic screening model of CCS for our GHGT-4 paper in 1998 , SFA Pacific has continued to improve the model which focuses on objectivity by stressing transparency and consistency with easy to compare cases. SFA Pacific has clearly shown identical inputs for key items such as fuel costs, non-fuel operating costs, unit capital costs, contingencies, site location factors, cost indexes, and especially capital charges. This makes it easy to see that power costs for the existing coal power plant baseline can be very low when the power plant is old and most of the existing capital is already paid-off. This GHGT-10 paper presents the most updated SFA Pacific analysis of CCS retrofit for existing coal power plant CO₂ mitigation. The paper focuses on showing and explaining why the CO₂ avoidance costs can be much higher for the existing plants versus new fossil fuel power plants. CO₂ taxes which are high enough to discourage new coal power plants with high CO₂ emissions would likely have little or no impact on existing coal power plants. Until the over 1,200 GW of existing old coal power plants begin reducing their high CO₂ emissions, there can be little net reduction in worldwide CO₂ growth. Converting or replacing this large capacity of existing coal power plants is essential to obtaining large CO₂ reductions . [Copyright &y& Elsevier]