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Strategies for Financing Large-scale Carbon Capture and Storage Power Plants in China

Author

Listed:
  • Xi Liang

    (Business School, University of Edinburgh, Edinburgh)

  • Hengwei Liu

    (The Fletcher School of Law and Diplomacy, Tufts University, Medford, Mass, USA , John F. Kennedy School of Government, Harvard University, Cambridge, Mass, USA)

  • David Reiner

    (Energy Policy Research Group, Judge Business School, University of Cambridge)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Xi Liang & Hengwei Liu & David Reiner, 2014. "Strategies for Financing Large-scale Carbon Capture and Storage Power Plants in China," Working Papers EPRG 1410, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1410
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Carbon capture and storage; Coal-fired power plant; Electricity; Finance; China;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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