Should a coal-fired power plant be replaced or retrofitted?

Journal Article · Sat Dec 15 00:00:00 EST 2007 · Environmental Science and Technology

DOI:https://doi.org/10.1021/es0711009· OSTI ID:21004454

Patino-Echeverri, Dalia; Morel, Benoit; Apt, Jay; Chen, Chao ^[1]

---

1. Carnegie Mellon University, Pittsburgh, PA (USA)

In a cap-and-trade system, a power plant operator can choose to operate while paying for the necessary emissions allowances, retrofit emissions controls to the plant, or replace the unit with a new plant. Allowance prices are uncertain, as are the timing and stringency of requirements for control of mercury and carbon emissions. We model the evolution of allowance prices for SO{sub 2}, NOx, Hg, and CO{sub 2} using geometric Brownian motion with drift, volatility, and jumps, and use an options-based analysis to find the value of the alternatives. In the absence of a carbon price, only if the owners have a planning horizon longer than 30 years would they replace a conventional coal-fired plant with a high-performance unit such as a supercritical plant; otherwise, they would install SO{sub 2} and NOx controls on the existing unit. An expectation that the CO{sub 2} price will reach $50/t in 2020 makes the installation of an IGCC with carbon capture and sequestration attractive today, even for planning horizons as short as 20 years. A carbon price below $40/t is unlikely to produce investments in carbon capture for electric power. 1 ref., 5 figs., 2 tabs.

• OSTI ID: 21004454
• Journal Information: Environmental Science and Technology, Vol. 41, Issue 23; Other Information: dpe{at}andrew.cmu.edu; ISSN 0013-936X
• Country of Publication: United States
• Language: English

Related Subjects

20 FOSSIL-FUELED POWER PLANTS
01 COAL, LIGNITE, AND PEAT
29 ENERGY PLANNING
POLICY AND ECONOMY
COAL
FOSSIL-FUEL POWER PLANTS
RETROFITTING
EMISSIONS TRADING
CARBON DIOXIDE
SULFUR DIOXIDE
MERCURY
NITROGEN OXIDES
CAPTURE
ALLOCATIONS
DECISION MAKING
INVESTMENT
AIR POLLUTION CONTROL
POLLUTION CONTROL EQUIPMENT
PRICES
PARAMETRIC ANALYSIS
CONSTRUCTION
ENVIRONMENTAL POLICY