Financing model for power plants with CCS Carbon Capture and Storage: Perspectives for the Southern Africa Region Johannesburg May 31-June 1, 2011 Nataliya.
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Slide 1
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
Slide 2
Motivation and background 31/5/2011 Carbon Capture and Storage:
Perspectives for the Southern Africa Region 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
Slide 3
Method 31/5/2011 Carbon Capture and Storage: Perspectives for
the Southern Africa Region 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)
Slide 4
Scenarios 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region Coal price Low 1$/mmbtu Medium
3$/mmbtu High 5$/mmbtu Revenues from CO 2 permits 0 $/ton 15 $/ton
50 $/ton Revenues from enhanced hydrocarbon recovery Oil (EOR) Coal
bed methane (ECBM)
Slide 5
Assumptions 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region 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
Slide 6
EOR assumptions 31/5/2011 Carbon Capture and Storage:
Perspectives for the Southern Africa Region 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
Slide 7
ECBM assumptions 31/5/2011 Carbon Capture and Storage:
Perspectives for the Southern Africa Region 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
Slide 8
The model 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region 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
Slide 9
The model 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region 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).
Slide 10
Financing structures 31/5/2011 LoansTermsCase 1Case 2Case 3 MDB
loan 1Maturity: 30 years Grace period: 5 years IRR: 4.85% 50%29%25%
MDB loan 2Maturity: 15 years Grace period: 3 years IRR: 4.19% 25%
Commercial loan Maturity: 15 years Grace period: 4 years IRR: 7.93%
50%25% Commercial loan with guarantee Maturity: 15 years Grace
period: 4 years IRR: 6.03% 71%25% Similar to IBRD Similar to EBRD
spread of 400 bps over LIBOR 50% cheaper than 1 st commercial loan
Combined Debt rate for 3 cases determines the WACC
Slide 11
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region 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% Further financial assumptions
Slide 12
Results 31/5/2011 Carbon Capture and Storage: Perspectives for
the Southern Africa Region Medium coal price Case 1: 50/50 MDB1 and
commercial loans
Slide 13
Results 31/5/2011 Carbon Capture and Storage: Perspectives for
the Southern Africa Region Medium coal price Case 1: 50/50 MDB1 and
commercial loans
Slide 14
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price Case 1: 50/50 MDB1
and commercial loans Average decrease in LCOE with 15$/ton: 6%
Average decrease in LCOE with 15$/ton: 21%
Slide 15
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price Case 1: 50/50 MDB1
and commercial loans Average decrease in LCOE with EOR : 1.4%
Average decrease in LCOE with ECBM : 1.2%
Slide 16
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price Pulverized coal No
extra revenues
Slide 17
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price Pulverized coal No
extra revenues For all cases, applied 30% and 50% concessional
financing, to see how LCOE changes Concessional financing terms
similar to Clean Technology Fund terms Maturity: 20 years Grace
period: 10 years IRR: 0.75%
Slide 18
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price Pulverized coal No
extra revenues
Slide 19
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price Pulverized coal No
extra revenues
Slide 20
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Medium coal price No extra
revenues
Slide 21
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Medium coal price No extra revenues
Results
Slide 22
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Medium coal price No extra revenues IGCC
Results price CO2 price
Slide 23
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Some cases found when concessional
finance added, LCOE of plant with CCS was LOWER than LCOE of plant
without CCS % of concessional finance required to reach breakeven
point where LCOEs with and without CCS equal was found for these
cases (i.e. it will be less than 50%)
Slide 24
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region Results Amount of concessional finance
required (US$ millions)
Slide 25
Conclusions 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region PC - the highest percentage increase
in LCOE with CCS, followed by Oxyfuel, and then IGCC CO 2 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
Slide 26
Thank you 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region Natalia Kulichenko
[email protected]
Slide 27
Extra slides 31/5/2011 Carbon Capture and Storage: Perspectives
for the Southern Africa Region
31/5/2011 Carbon Capture and Storage: Perspectives for the
Southern Africa Region ParameterValues and explanation Coal price 1
$/mmbtu (Low) 3 $/mmbtu (Medium) 5 $/mmbtu (High) The values 1 and
5 were selected as extremes, with 3 as the average included. The
low price is based on cheap domestic coal prices in South Africa
(check source Eskom PAD?), the high price is the price of
internationally traded coal(check source commodity review), and the
medium is the average CO2 price 0$/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 oil
recovery 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. Enhanced coal bed methane
recovery 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 y.