Z E P Technology Platform

Zero Emission Fossil Fuel Power Plants

The cost of technology - designing a cost estimation process

- Cost estimations- Representative CCS cases

- Common issues across CCS Chain

Basis for discussion at Kick-off 14th September

Vattenfall Research and Development AB/Clas Ekström

7th September 2009

Collect and calibrate costs• Collect input from EU-financed projects, available studies and TTech

members• CAPEX/Investment Costs• OPEX excluding fuel costs

• Adjust to consistency with the selected, representative CCS cases and basic assumptions

• Perform calculations of total yearly costs from:• Yearly Capital Costs (from CAPEX, Interest rate, Economic lifetime)• Yearly OPEX excluding fuel costs• Yearly fuel costs (for Power Plants and Capture)

Accuracy:• Depends on accuracy in studies used• At the best corresponding to accuracy in (pre-)feasibility studies;

~+/-30% (?)

Cost estimations (1)

For Power plants and capture:

Perform calculations also of:• Break Even Electricity Selling Price

(from total yearly costs and yearly net electricity production)

• CO2 avoidance costs for capture

For Transport and Storage:

Perform calculations also of:

• Costs per ton transported/stored CO2

(from total yearly costs and yearly transported/stored CO2)

For selected complete CCS cases:

Perform calculations also of:• Break Even Electricity Selling Price

• CO2 avoidance costs

Cost estimations (2)

0

20

40

60

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Hard coal Lignite Natural Gas

EU

R/t

CO

2

Pre-combustion

Post-combustion

Oxyfuel

Note:CO2 Avoidance cost without transport and storage cost

Power plant andCCS technologyimprovementpotential

CO2 Avoidance Costs

0

10

20

30

40

50

60

70

80

90

Hard coal Lignite Natural Gas

EU

R/M

Wh

No capturePre-combustionPost-combustionOxyfuel

Note:Power generation cost without CO2 transport and storage cost

Cost of Electricity ==Break Even Electricity Selling Price

Example from ZEP “WG1 Power Plant and Carbon Dioxide Capture,Final Report dd. 13 October 2006”

1. Define reference power plants without CCS

• Selected to be considered as “representative” for European large fossil fuelled power plants, that are likely to in the future become replaced by or retrofitted with power plants with CCS.

• Such a selection was made in EC-financed “Capture R&D” projects• ENCAP and CASTOR , and then adapted to and used by DYNAMIS, CESAR, DECARBIT,

CAESAR• As an initial proposal to the meeting, these reference power plants without capture are

proposed as reference power plants for this study:

• Fired with• Natural gas (~400 MW el gross)• bituminous coal (~800 MW el gross, possibly also ~400 MW el gross)• lignite (~1000 MW el gross, possibly also ~400 MW el gross)

• State-of-the art power technology

Representative CCS Cases- Power plants with CO2 Capture

2. Define Relevant Power plant concepts with CO2 capture• Using the reference power plants as starting point

• “First Generation” capture power plants; technologies that are candidates for EU Demonstration Project• Focus on “commercial” plants• Consider demo plants

• “2nd Generation technologies• Technologies to be selected based on ZEP TTech Long Term R&D Plan

3. The power plant concepts with CO2 capture defines some inputs to transport and storage:

• Estimated CO2 production rates• “Typical/representative” operation cycles + load factors; base-load operation typically

7.500 full-load hrs per year used in EC-financed capture projects• Technical lifetimes; 25 years for Natural Gas Combined Cycle plants, 40 years for

bituminous coal and lignite fired plants used in EC-financed capture projects

Representative CCS Cases- Power plants with CO2 Capture

Representative CCS Cases - Transport scenarios - Commercial phase

Commercial phase:

• Identify and describe three (?) representative transport scenarios with a minimum transported volume (e g 10 mT CO2 p a)

• Both Clusters and Point-to-Point

• Trunk-and feed-in pipelines, hub solutions, river shipping and sea-going ship transport

• Maximum pipe-line distance 750 km

• Maximum shipping distance 2 000 km

• Evaluate published reports’ cost analyses

• Extrapolate to the identified scenarios

Source: McKinsey, Carbon Capture and Storage: Assessing the Economics

Representative CCS Cases - Transport scenarios - Demonstrator phase

Demonstrator phase:

• Identify and describe three representative and different transport scenarios (point-to-point) each for a minimum of 2 mT CO2 p a

• Evaluate published reports’ cost analyses

• Extrapolate to the identified scenarios

• List Demonstrator Candidate Projects (of relevant size)

• Identify characteristics and stakeholders• Suggested list from Storage Cost Group

• Selection criteria if needed • What is representative, how many cases if not

all ?• Accessibility of the data

Source: McKinsey, Carbon Capture and Storage: Assessing the Economics

Representative CCS Cases - Storage Demonstrator phase/Short-Term Scenarios

• Starting point is ZEP Demo proposal• Short-term scenarios identified from current and proposed demo

projects : 1 source – 1 sink

• Three main parameters to vary 8 cases. To be agreed at kick-off meeting

– Depleted field <-> Aquifer– Onshore <-> offshore– Shallow > deep

Representative CCS Cases - Storage Commercial phase/Long-term ScenariosTo be further elaborated

1. Both Clusters and Point-to-Point2. Cluster analysis – scenario definition based on

emissions (regional) thus capture & transport1. Identification of emissions clusters

Source: IEA-GHG / ECN studiesDG TREN call on Europe-wide CO2 infrastructuresOther ?

3. For each cluster, identification of geological formations suitable for storage

1. To identify basic parameters for storage properties (depth, permeability, porosity…)

2. Limited information available (DYNAMIS / GeoCapacity?)

3. North-Sea basin task force (Poyry)4. Other ?

4. Specify operating boundariesConsistent technical lifetime, common flowrate, volume…)

Common Issues across CCS Chain (1)

1. CO2 pressures and quality standard/composition(s)• 1st attempt DYNAMIS/ENCAP quality requirements, covering technical and HSE issues for

transport – and to some extent storage - of CO2. For pipeline, ship transport.Table: Summary of CO2 quality requirements for pipeline transport and for EOR. Elaborated within the DYNAMIS project-Due consideration given to existing regulations pertaining to safety and toxicity in order to define maximum limits for the concentration of chemical components that are likely to occur in the CO2 stream – especially in the event of a pipeline rupture.-Owing to the risk of hydrate formation and corrosion, mechanical integrity of the transport system is much dependent on the absence of free water.-Other impurities should be excluded mainly for technical reasons.-Geological storage itself is not believed to impose any additional or more severe quality requirements--EOR storage may impose more stringent requirements, due to interactions with the oil.

Common Issues across CCS Chain (2)

1. CO2 pressures and quality standard/composition(s)• The capture concepts developed in ENCAP and other EU-projects are designed so that

these requirements will be met.• CO2 Transport and and Storage Working Groups can assume that CO2 streams from large

power plants will meet these requirements

ENCAP Guidelines (elaborated before DYNAMIS) cover some specific limit values for ship transport and also some additional components

Common Issues across CCS Chain (3)

1. CO2 pressures and quality standard/composition(s)

•Required delivery pressure(s) to transport to be defined by:•Required delivery pressure(s) to storage, based on the defined “representative” storage cases. (input to CO2 transport) •To define required delivery pressure(s) to transport: Add estimated total “net” pressure losses through transport chain, as defined by transport cases; transport mode(s) – pipeline, ship - and distances; as much as possible of required compression and conditioning to be integrated with power plant and capture.

•1st attempt as in ENCAP and other projects:

•Pipeline transport conditions:•CO2 delivery pressure 110 bar•CO2 delivery temperature max 30°C.

•Ship transport conditions:•CO2 delivery pressure 7 bar•CO2 delivery temperature max -50°C.

Common Issues across CCS Chain (4)

1. Project timing1st attempt “typical”

timelines for realization of complete CCS projects, estimated in a (soon) publically available DYNAMIS report, and by ZEP (“EU Demonstration Programme for CO2 Capture and Storage (CCS)”)

Common Issues across CCS Chain (5)

5. Economic boundary conditions/Key assumptionsInterest rates• In ENCAP and other projects, a combined real interest rate is used taking into account interest rates on loans, equity rate, and

required rate of equity, defined as a weighted average cost of capital = 8.0 % with variations from 4.0 to 12.0 %. • If the inflation rate is assumed to be equal for all costs and income in the project life it can be included in the real terms interest

rate. This has been done in ENCAP and other projects. • As the objective is to evaluate different CO2 capture methods, the comparisons are based on pre-tax and pre-equity payments.

The equity rate is consequently included in the average real term interest rate• As for the equity rate also the corporate tax can be disregarded as the comparisons are based on pre-taxation and pre-equity

payments.• Some countries have special emission taxes on NOx and SO2. As there are no common European emission taxes, emission

taxes are not included in the calculations.

Economic lifetimesENCAP and other projects make calculations for:• 40 years – estimated lifetime for coal fired power plants• 25 years: Various things not related to the power plant itself, can happen and such things cannot be foreseen. Therefore, there

is a general interest to make sure that an investment can be "sufficiently" profitable also for a not so long period as 40 years - say 25 years, even when it is most likely that a plant can generate good incomes for a longer period - 40 years.

• Do we in ZEP study need to consider credit lifetime20 years if CDM projects??

Common Issues across CCS Chain (6)

5. Economic boundary conditions/Key assumptionsFuel prices – possible selections:a) From current EU-projects (CESAR, DECARBIT, CAESAR), real terms year 2008:• Natural gas: 6.5 €/GJ, variations 4 – 9 €/GJ• Bituminous coal: 3 €/GJ, variations 1.5 – 4.5 €/GJ• Lignite: 1.2 €/GJ, variations 0.6 – 1.7 €/GJ

b) Based on EC Second Strategic Energy Review, Nov 2008:Select values for year 2020? Base case average oil price scenarios?• Natural gas: 8.6 €/GJ, variations 6 - 11 €/GJ• Bituminous coal: 2.7 €/GJ, variations 2 – 3.5 €/GJ

$'2005/boe 2005 2010 2015 2020

Oil price scenario 61$/bbl 100$/bbl 61$/bbl 100$/bbl 61$/bbl 100$/bbl

Oil 54,5 54,5 69,7 57,9 83,3 61,1 100,1

Gas 34,6 41,5 46,3 43,4 61,4 46,0 77,5

Coal 14,8 13,7 15,8 14,3 20,3 14,7 24,2

1 boe (barrel of oil equvalent) = 6.12 GJ 1€ = 1.25$ Inflation 2%/year

EC Working Document "Europe's current and future energy position. Demand – resources - investments" for EU Second Strategic Energy Review, {COM(2008) 781 final}, Nov 2008

€'2008/GJ 2005 2010 2015 2020

Oil price scenario 61$/bbl 100$/bbl 61$/bbl 100$/bbl 61$/bbl 100$/bbl

Oil 7,6 7,6 9,7 8,0 11,6 8,5 13,9

Gas 4,8 5,8 6,4 6,0 8,5 6,4 10,8

Coal 2,1 1,9 2,2 2,0 2,8 2,0 3,4

c) From other public source(s)•Natural gas: …€/GJ, variations…… €/GJ•Bituminous coal: …€/GJ, variations…… €/GJ•Lignite: …€/GJ, variations…… €/GJ

Common Issues across CCS Chain (7)

5. Economic boundary conditions/Key assumptionsElectricity prices (to calculate electricity costs for CO2 transport and storage)From public source(s):• …..€/MWh el

Currency exchange ratesFrom current EU-projects (CESAR, DECARBIT, CAESAR):• 0.683 €/$• 1.258 €/£

From EC Second Strategic Energy Review, Nov 2008:• 1.25 $/€

Year for cost levels: 2008??

Load factors (from Power Plant and Capture issues)

Development of markets, financial incentives, financial supports, regulatory issues etc. that influence demonstration and deployment rates. Needed? Can it be achieved?

Common Issues across CCS Chain (8)

General approach for all the work:1. Make “check list(s)” with relevant cost items2. Indicate and select only those who are considered to have significant impact on total

costs for power plants and capture, transport or storage.

Starting points:• ENCAP “Reference cases and guidelines for technology concepts” (2008)• CESAR, DECARBIT,CAESAR “Common Framework Definition Document” (2009)• McKinsey study “Carbon Capture & Storage: Assessing the Economics”, Sept 2008, and following study “EU

Demonstration Programme for CO2 Capture and Storage (CCS)”: ZEP’s Proposal”, Nov 2008• DYNAMIS Brochure “Electricity and Hydrogen Production with Near-Zero Emissions with CO2 Capture and

Storage (CCS)” (To be published)