Comparing Flexible CO2 Capture in Gas- and Coal-Dominated Electricity Markets
Authors: Fyffe John R. , Cohen Stuart M. , Webber Michael E. 
Published: March 2012

Coal-fired power plants are a source of inexpensive, reliable electricity for many countries. Unfortunately, their high carbon dioxide (CO2) emissions rates contribute significantly to global climate change. With the likelihood of future policies limiting CO2 emissions, CO2 capture and sequestration (CCS) could allow for the continued use of coal while low- and zero-emission generation sources are developed and implemented. This work compares the potential impact of flexibly operating CO2 capture systems on the economic viability of using CCS in gas- and coal-dominated electricity markets. The comparison is made using a previously developed modeling framework to analyze two different markets: 1) a natural-gas dominated market (the Electric Reliability Council of Texas, or ERCOT) and 2) a coal-dominated market (the National Electricity Market, or NEM in Australia). The model uses performance and economic parameters for each power plant to determine the annual generation, CO2 emissions, and operating profits for each plant for specified input fuel prices and CO2 emissions costs. Previous studies of ERCOT found that flexible CO2 capture operation could improve the economic viability of coal-fired power plants with CO2 capture when there are opportunities to reduce CO2 capture load and increase electrical output when electricity prices are high. The model was used to compare the implications of using CO2 capture systems in the two electricity systems under CO2 emissions penalties from 0–100 US dollars per metric ton of CO2. Half the coal-fired power plants in each grid were selected to be considered for a CO2 capture retrofit based on plant efficiency, whether or not SO2 scrubbers are already installed on the plant, and the plant’s proximity to viable sequestration sites. Plants considered for CO2 capture systems are compared with and without inflexible CO2 capture as well as with two different flexible operation strategies. With more coal-fired power plants being dispatched as the marginal generator and setting the electricity price in the NEM, electricity prices increase faster due to CO2 prices than in ERCOT where natural gas-plants typically set the electricity price. The model showed moderate CO2 emissions reductions in ERCOT with CO2 capture and no CO2 price because increased costs at coal-fired power plants led to reduced generation. Without CO2 prices, installing CO2 capture on coal-fired power plants resulted in moderately reduced CO2 emissions in ERCOT as the coal-fired power plants became more expensive and were replaced with less expensive natural gas-fired generators. Without changing the makeup of the plant fleet in NEM, a CO2 price would not currently promote significant replacement of coal-fired power plants because there is minimal excess capacity with low CO2 emissions rates that can displace existing coal-fired power plants. Additionally, retrofitting CO2 capture onto half of the coal-based fleet in NEM did not reduce CO2 emissions significantly without CO2 costs being implemented because the plants with capture become more expensive and were replaced by the coal-fired power plants without CO2 capture. Operating profits at NEM capture plants increased as CO2 price increased much faster than capture plants in ERCOT. The higher rate of increasing profits for plants in NEM is due to the marginal generators in NEM being coal-based facilities with higher CO2 emissions penalties than the natural gas-fired facilities that set electricity prices in ERCOT. Overall, coal-fired power plants were more profitable with CO2 capture systems than without in both ERCOT and NEM when CO2 prices were higher than USD25/ton.