Carbon dioxide capture from coal-fired power plants : a real potions analysis

Investments in three coal-fired power generation technologies are valued using the "real options" valuation methodology in an uncertain carbon dioxide (CO2) price environment. The technologies evaluated are pulverized coal (PC), integrated coal gasification combined cycle (baseline IGCC), and IGCC with pre-investments that make future retrofit for CO2 capture less expensive (pre-investment IGCC). All coal-fired power plants can be retrofitted to capture CO2 and can be considered "capture-capable", even though the cost and technical difficulty to retrofit may vary greatly. However, initial design and investment that take into consideration such future retrofit, makes the transition easier and less expensive to accomplish. Plants that have such an initial design can be considered to be "capture-ready". Pre-investment IGCC can be considered to be "capture-ready" in comparison to PC and baseline IGCC on this basis. Furthermore, baseline IGCC could be taken as "capture-ready" in comparison to PC. Cash flow models for specific cases of these three technologies were developed based on literature studies. The problem was formulated such that CO2 price is the only uncertain cash flow variable. All cases were designed to have a constant net electric output before and after CO2 retrofit. As a result, electricity price uncertainty had no differential impact on the competitive positions of the different technologies. While coal price was taken to be constant, sensitivity analysis were conducted to show the impact of varying coal prices. Investment valuation was done using the "real options" approach.

Department dc:contributor.department

Massachusetts Institute of Technology. Technology and Policy Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2005

Author dc:creator

• Sekar, Ram Chandra

Advisor dc:contributor.advisor

• Henry D. Jacoby, Howard J. Herzog and David G. Laughton.

• Technology and Policy Program.
• Mechanical Engineering.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/32292

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/32292