Task:
You are to provide a detailed financial analysis of an USC coal fired power station under two scenarios used in the Finkel Review (2017). The scenarios are:
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Business as Usual (BaU)
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Emission Intensity Scheme (EIS)
The electricity market remains in a prolonged period of uncertainty due to limited government action on carbon pricing and abatement. The price of electricity is higher under this scenario.
Government to introduce an EIS where electricity generators that emit more than 600 kilograms of carbon per megawatt hour (MWh) of electricity must purchase carbon permits while those that emit less receive permits that they can sell. Permits will need to be purchased for the USC coal fired power station. The electricity price is lower under this scenario.
https://imgur.com/a/G0q20RP
General Information Detail Units Notes Source 4 years Spread evenly over years of construction with outlay for each year occurring at the start of given year. Initial outlay at 2021. iea, p.12 Construction time Years of construction Life after construction 2021-2024 35 years Jacobs, p.122 After plant is complete. Mega Watt (MW) is an instantaneous output. So at full output for 1 hour, the plant is said to produce 743MW hours (MWh). Total output for year=MWh x 24 x 365 x Available Capacity Factor Output Emissions Capital cost Cost of fuel (black coal) Heat rate Variable fuel operating costs Variable non-fuel operating cost 743 MW 0.7 t of CO2-e/MWh 3076000 $/MW 2.25 $/G) 8.85 GJ/MWh 19.91 $/MWh 1.60 $/MWh Note: Total Outlay = Output x Capital Cost per MW Average from Graph Jacobs, p.122 Finkel, p. 203 Jacobs, p.122 Jacobs, p.39 Jacobs, p.122 Penn State, 3.1.2 Jacobs, p.122 VC = $/GJ x Heat Rate. Note: Total Fixed Operating costs = Output x Fixed Operating cost per MW Fixed operating cost Schedule maintenance Effective outage rate Available capacity factor Coal inventory days Coal inventory Spare parts inventory 87000.00 $/MW/year 2.00 Weeks p.a. 5.00% p.a. 91.15% p.a. 60 days 21,304,782 $ 2,000,000 $ Jacobs, p.122 Jacobs, p. 120 Jacobs, p. 120 Jacobs, p. 120 (52-Maintenance Weeks)/52 - Outage Rate Coal is stored on site 23,304,782 $ Straight-Line $ 100,000,000 $ 30% Initial working capital investment occurs at the beginning of first full year of operations. Straight-line over operating life (life after construction) Assumed $0 due to costs of demolition Paid the year of income Working capital Depreciation Salvage Site rectification Business as usual (Bal) information Price of electricity under Bau Cost of capital under Bau Emission Intensity Scheme (EIS) information Price of electricity under EIS Cost of capital under EIS Average from Graph Jacobs, p. 51 85 $/MWh 9.5% p.a. Average from Graph 72 $/MWh 9.5% Jacobs, p. 51 EIS baseline 0.6 t of CO2-e/MWh Jacobs, p. 24 Permits earned for year = Total Annual Output MWh x (EIS baseline Emission per MWh) Price of EIS permit is in first year of production as it takes 4 years to build power station (2021-2024) Compounded growth 17.71 $/permit 5.7% p.a. Jacobs, p. 52 Jacobs, p. 52 Price per Els permit first year production (2025) EIS certificate annual compounded growth Additional Values Hours Days 24.0 per day 365.0 per year General Information Detail Units Notes Source 4 years Spread evenly over years of construction with outlay for each year occurring at the start of given year. Initial outlay at 2021. iea, p.12 Construction time Years of construction Life after construction 2021-2024 35 years Jacobs, p.122 After plant is complete. Mega Watt (MW) is an instantaneous output. So at full output for 1 hour, the plant is said to produce 743MW hours (MWh). Total output for year=MWh x 24 x 365 x Available Capacity Factor Output Emissions Capital cost Cost of fuel (black coal) Heat rate Variable fuel operating costs Variable non-fuel operating cost 743 MW 0.7 t of CO2-e/MWh 3076000 $/MW 2.25 $/G) 8.85 GJ/MWh 19.91 $/MWh 1.60 $/MWh Note: Total Outlay = Output x Capital Cost per MW Average from Graph Jacobs, p.122 Finkel, p. 203 Jacobs, p.122 Jacobs, p.39 Jacobs, p.122 Penn State, 3.1.2 Jacobs, p.122 VC = $/GJ x Heat Rate. Note: Total Fixed Operating costs = Output x Fixed Operating cost per MW Fixed operating cost Schedule maintenance Effective outage rate Available capacity factor Coal inventory days Coal inventory Spare parts inventory 87000.00 $/MW/year 2.00 Weeks p.a. 5.00% p.a. 91.15% p.a. 60 days 21,304,782 $ 2,000,000 $ Jacobs, p.122 Jacobs, p. 120 Jacobs, p. 120 Jacobs, p. 120 (52-Maintenance Weeks)/52 - Outage Rate Coal is stored on site 23,304,782 $ Straight-Line $ 100,000,000 $ 30% Initial working capital investment occurs at the beginning of first full year of operations. Straight-line over operating life (life after construction) Assumed $0 due to costs of demolition Paid the year of income Working capital Depreciation Salvage Site rectification Business as usual (Bal) information Price of electricity under Bau Cost of capital under Bau Emission Intensity Scheme (EIS) information Price of electricity under EIS Cost of capital under EIS Average from Graph Jacobs, p. 51 85 $/MWh 9.5% p.a. Average from Graph 72 $/MWh 9.5% Jacobs, p. 51 EIS baseline 0.6 t of CO2-e/MWh Jacobs, p. 24 Permits earned for year = Total Annual Output MWh x (EIS baseline Emission per MWh) Price of EIS permit is in first year of production as it takes 4 years to build power station (2021-2024) Compounded growth 17.71 $/permit 5.7% p.a. Jacobs, p. 52 Jacobs, p. 52 Price per Els permit first year production (2025) EIS certificate annual compounded growth Additional Values Hours Days 24.0 per day 365.0 per year
