Strategies for Financing Large-scale Carbon Capture and Storage Power Plants in China
Hengwei Liu and
David Reiner ()
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
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 (search for similar items in EconPapers)
JEL-codes: Q4 Q42 O3 O13 P48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-ene and nep-env
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Working Paper: Strategies for Financing Large-scale Carbon Capture and Storage Power Plants in China (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1430
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