Valuation of clean energy investments: The case of the Zero Emission Coal (ZEC) technology

Today, coal-fired power plants produce about 55% of the electrical energy output in the U.S. Demand for electricity is expected to grow in future. Coal can and will continue to play a substantial role in the future global energy supply, despite its high emission of greenhouse gases (e.g. CO2 etc.) and low thermal energy conversion efficiency of about 37%. This is due to the fact that, it is inexpensive and global reserves are abundant. Furthermore, cost competitive and environmentally acceptable energy alternatives are lacking. New technologies could also make coal-fired plants more efficient and environmentally benign.; One such technology is the Zero Emission Carbon (ZEC) power plant, which is currently being proposed by the ZECA Corporation. How much will such a technology cost? How competitive will it be in the electric energy market when used as a technology for mitigating CO2 emission? If there were regulatory mechanisms, such as carbon tax to regulate CO2 emission, what would be the minimum carbon tax that should be imposed? How will changes in energy policy affect the implementation of the ZEC technology? How will the cost of the ZEC technology be affected, if a switch from coal (high emission-intensive fuel) to natural gas (low emission-intensive fuel) were to be made?; This work introduces a model that can be used to analyze and assess the economic value of a ZEC investment using valuation techniques employed in the electric energy industry such as revenue requirement (e.g. cost-of-service).; The study concludes that the cost of service for ZEC technology will be about {dollar}95/MWh at the current baseline scenario of using fuel cell as the power generation system and coal as the primary fuel, and hence will not be competitive in the energy markets. For the technology to be competitive, fuel cell capital cost should be as low as {dollar}500/kW with a lifetime of 20 years or more, the cost of capital should be around 10%, and a carbon tax of {dollar}30/t of CO2 should be in place. Under these conditions, the cost of service would be {dollar}54/MWh and ZEC technology would become as competitive as the highly efficient combined-cycle gas-turbine technology.