final version CO2NET lectures 24-4-2006-4 Economics of CCS

The largest built Amine capture plant had a capacity of 1.2 ktonCO2/day A 500 MW coal plant produces about 10 kt Co2/day I1 I2
=
(
1.2 ktonCO2/h 10 ktonCO2/h
1-1-1996
1-1-1998
1-1-2000
1-1-2002
1-1-2004
See for exchanges rates
Source: IMF
Cost estimations
Economies of scales
I1 I2
=
(
C1 C2
)
m
I = Investment cost C = Capacity of plant
Basics of business economics
Net Present Value (NPV) (3)
NPV = I +
B C
α
where: I B C α r L
r α= L 1 (1 + r )
= initial investment = annual benefits = annual costs (excluding capital costs) = the capital recovery factor = the discount rate = the life time of the project/equipment
23.1% 13.0% 9.6% 8.0% 7.1% 6.5% 5.5%
26.4% 16.3% 13.1% 11.7% 11.0% 10.6% 10.1%
29.8% 19.9% 17.1% 16.0% 15.5% 15.2% 15.0%
33.4% 23.9% 21.4% 20.5% 20.2% 20.1% 20.0%
Estimate
Actual
Time
Source: EPRI
Cost estimations
Learning Curves
100 90 80
Cost per unit
1st unit -20% 2nd unit 4th unit 8th unit -20% -20%
70 60 50 40 30 20 10 0 0
512th unit
200
400 600 Cumulative production of units
800
1000
Progress ratio =0.8
Cost estimations
Learning Curves 2
100 1st unit 2nd unit 4th unit 8th unit
Case of capital cost calculation
Suppose we buy machine of 100 This machine can produce 40 worth of products each year. We also have to pay 10 per year for raw materials. Expected life time = 5 years. How much do we earn?
Basics of business economics
Cost breakdown of production
Profit losses raw materials and fuels variable costs
price
Personnel, maintenance, insurance etc Investment cost Capital expenses (Capex) interest depreciation
Sources
0.64 0.64 0.62 0.72 0.69 0.87 0.49
Reference volume electric power throughput water surface throughput gas
0.65 - 0.70 0.80 - 0.85 0.6 0.50 - 0.60 0.8
First commercial service Second plant in service
3rd plant 4th plant Development period cost estimates 5th plant
Mature plant costs
Simplified cost estimate with incomplete data
Prepared by Utrecht Centre for Energics of CCS
Basics of business economics How to estimate costs Cost of CCS Benefits of CO2 storage
interest=5%
Year 0 1 2 3 4 5 Total
Basics of business economics
Net Present Value (NPV) (2)
Bi Ci NPV = ∑ i i = 0 (1 + r )
n
where: Bi Ci r n
= the benefits in year i = the costs in year i = the discount rate = the life time of the project/equipment
Cost estimations
Cost estimations
Converting historical data to current costs Economics of scale Mountain of death Learning curves
Cost estimations
CO2NET Lectures on Carbon Capture and Storage
1. 2. 3. 4. 5. Climate Change, Sustainability and CCS CO2 sources and capture Storage, risk assessment and monitoring Economics Legal aspects and public acceptance
Basics of business economics
Capital Recovery factor
Discount rate 4% 5% 10% 15% 20% 25%
Depreciation period (years) 5 22.5% 10 12.3% 15 9.0% 20 7.4% 25 6.4% 30 5.8% 50 4.7%
37.2% 28.0% 25.9% 25.3% 25.1% 25.0% 25.0%
Basics of business economics
Cost of capturing
α *I+ O&M COC = captured
COC I α O&M Captured = cost of electricity (/ton) = investment cost () = the capital recovery factor (a-1) = yearly operation cost inch. amines and fuel cost (/a) = yearly captured CO2 (ton/a)
fixed costs
Fixed costs are independent of the annual output Variable cost depend (in general) linear on output
Taken from Copernicus institute
Basics of business economics
Typically: m ≈ 2/3
Cost estimations
Some examples of Economies of scales
Process Production of sulphuric acid from sulphur Production of nitric acid from ammonia Electrolysis of NaCl Synthesis of ammonia from natural gas Oxidation of ethylene to ethylene oxide Production of cyclohexanon Production of phenol (via chlorobenzene) Unit operation Stirred tank reactor (STR) Electric furnace Cooling tower Heat exchanger Electric precipitator
Cash Flow Value compared to year 0 cost benefit cost benefit year=0 year=0 -100.00 -100.00 0.00 -10.00 40.00 -9.52 38.10 -10.00 40.00 -9.07 36.28 -10.00 40.00 -8.64 34.55 -10.00 40.00 -8.23 32.91 -10.00 40.00 -7.84 31.34 -150.00 200.00 -143.29 173.18 NPV year=0 -100.00 28.57 27.21 25.92 24.68 23.51 29.88
Onken and Behr, Chemische Prozekunde, 1996; Rentz, O.: Industriebetriebwirtschaftslehre. Reader, Karlsruhe University, 1993