# Presentation: 284388

## Economic Considerations in the Electricity Sector Related to Carbon Legislation

- Center for Strategic and International Studies

- MARCH 31,  2 0 0 8

- Copyright © 2008 by R. W. Beck, Inc. All Rights Reserved.

## Market Analysis – Scenario Definitions

**Business as usual –** no carbon tax/cap
**Moderate carbon control** **–** $30/ton (2008$) CO2 tax/ allowance price
**Aggressive carbon control –** $50/ton (2008$) CO2 tax/ allowance price

- Triggers IGCC withcapture over uncontrolled PC in new builds

- Triggers retrofit ofexisting PC Units

## Market Analysis – Methodology

- R. W. Beck Approach
- Electricity Market Simulation Models
- Proprietary econometric natural gas forecast
- Exceptions
- Renewables above existing state-level RPS permitted
- Demand Elasticity = 0.2

## Considerations Not Addressed

- Major transmission changes
- Fuel price changes other than natural gas
- Improvements in costs of CCS technology
- Reductions will occur within utility industry  (i.e., no consideration for offsets or cheaper reductions in other economy sectors)

## CO2 Emissions By Technology/Fuel Type

- Given in Tons/MWh

## PC Schematic without CCS

- 1,000 MW Net Capacity

## PC Schematic with CCS

- 700 MW Net Capacity

**Electricity**

- Loss of 1/3 Installed Capacity

## Capital Cost Increases – Including CCS (%)

## Heat Rate Increases – Including CCS (%)

## O&M Cost Increases – Including CCS (%)

## Market Observations

- Given a $50 tax
- 347 GW of coal-fired capacity is retrofitted
- 104 GW of capacity lost
- Renewable power options are not built beyond RPS requirements

## Market Observations in 2024

- National Average Power Price (2008$)
- $0 tax - $60
- $30 tax - $87
- $50 tax - $94

## Cumulative Capacity Additions by 2024

**$0**

**$30**

**$50**

**360**

**275**

**340**

**0**

**50**

**100**

**150**

**200**

**250**

**300**

**350**

**400**

## Cumulative Capital Expenditures by 2024

- Given in (2008$)
- $0 tax - $600 Billion
- $30 tax - $440 Billion
- $50 tax - $1,200 Billion

## CO2 Emissions Estimated in 2024

- Billions of Metric Tons
- $0 tax – 3.7
- $30 tax – 2.7
- $50 tax – 0.8
- 2006 Electricity Sector Level – 2.4
- 1990 Electricity Sector Level – 2.0

## Contact Information

**Vincent D. Hahn**
- Principal & Vice PresidentGlobal Asset ConsultingR.W. Beck, Inc.
- 550 Cochituate RoadMeditech Corporate Center, West WingFramingham, MA 01701(508) 935-1864_[vhahn@rwbeck.com](mailto:vhahn@rwbeck.com)_

*Major Offices in Boston, Denver, **Orlando, Seattle, and Singapore*

## APPENDIX

## Carbon Capture Options

_**Capture Technologies**_

| Commercial |   | Prototype |
| --- | --- | --- |
| Amine scrubbing
Selexol Process (IGCC)
Rectisol Process (IGCC) |  | Amine-based solid sorbent
Aqueous ammonia scrubbing
Aqueous ammonia multi-pollutant capture, CO2/SO2/NOX
PC oxy-fuel combustion, cryogenic Air Separation Unit (ASU)
PC oxy-fuel combustion, oxygen-selective membrane ASU |

## Market Analysis – Methodology

- R. W. Beck Approach
- MarketPowerTM and ProModTM power market simulation models
- Proprietary econometric natural gas market forecasting model
- Key Assumptions same as 2nd Quarter 2008 Base Case
- Exceptions
- Renewables above existing state-level Renewable Portfolio Standards can be adopted based on economics
- Demand response to price increases (demand elasticity = 0.2)