Liang, X., Liu, H. and Reiner, D.
Strategies for Financing Large-scale Carbon Capture and Storage Power Plants in China
CWPE1430
Abstract: Building on previous stakeholder consultations from 2006 to 2010, we conduct a financial analysis for a generic CCS power plant in China. In comparison with conventional thermal generation technologies, a coal-fired power plant with CCS requires either a 70% higher on-grid electricity tariff or carbon price support of approximately US$50/tonne CO2 in the absence of any other incentive mechanisms or financing strategies. Given the difficulties of relying on any one single measure to finance a large-scale CCS power plant in China, we explore a combination of possible financing mechanisms. Potential measures available for increasing the return on the CCS investment include: enhanced oil recovery (EOR), a premium electricity tariff, and operational investment flexibility (e.g. solvent storage, upgradability). A simulation found that combining several financing options could not only provide private investors with a 12% to 18% return on equity (ROE), but also significantly reduce the required on-grid tariff to a level that is very close to the tariff level of existing coal-fired power plants and much lower than the tariffs for natural gas combined cycle and nuclear power plants. Therefore, we suggest that a combination of existing financing measures could trigger private investment in a large-scale CCS power plant in China.
Keywords: Carbon capture and storage, Coal-fired power plant, Electricity, Finance, China
JEL Codes: Q40 Q42 O30 O13 P48
PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1430.pdf 
EPRG Paper Link: 1410
Open Access Link: https://doi.org/10.17863/CAM.5848
