Financing Capture Ready Coal-Fired Power Plants in China by Issuing Capture Options
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Abstract
‘Capture Ready’ is a design concept enabling fossil fuel plants to be retrofitted more economically with carbon dioxide capture and storage (CCS) technologies, however financing the cost of capture ready can be problematic, especially in the developing world. We propose that fossil fuel plants issue tradable Capture Options to acquire financing. The Capture Option concept could move CCS forward politically in countries such as China, speed up CCS technology development, help Capture Ready investors diversify risk, and offer global warming investors an alternative investment opportunity. As a detailed case study, we assess the value of a Capture Option and Capture Ready plant for a 600 MW supercritical pulverized coal power plant in China, using a cash flow model with Monte-Carlo simulations. The gross value of Capture Ready varies from CNY3m ($0.4m) to CNY633m ($84.4m) at an 8% discount rate and the Capture Option is valued at CNY113m ($15.1m) to CNY1255m ($167.3m) for two of the four scenarios analyzed.