approaches to combustion, and geologic storage settings (see the section titled “Geologic Storage of CO2” below in this chapter). The cost range of these demonstrations will be significant, but it should be considered an investment in defining more accurately the alternative pathways for reducing CO2 emissions from electric power generation with coal and natural gas.
The sensitivity of LCOE to estimated capital cost is illustrated in Table 7.15 for carbon costs of $0, $50, and $100 per tonne of CO2. The table compares the impacts on LCOE from three different scenarios: capital costs equal to, 20 percent below, and 30 percent above the estimates used to construct Figures 7.4–7.6. Because the fraction of LCOE attributable to capital cost varies with the fuel and plant types, the percentage change in LCOE also varies. Table 7.15 shows that the cost of electricity is more sensitive to capital cost variations in coal plants than in natural gas plants, for which fuel cost accounts for a greater fraction of LCOE. It should also be noted that the critical threshold on cost of CO2 emissions, above which it is less expensive to install CCS than to emit the CO2 and pay the associated cost, shifts as the capital cost changes (see Annex 7.A for additional discussion). Until more experience is gained in construction and operation of the various plant types with CCS, however, significant uncertainties in costs are likely to remain.
Table 7.16 shows the sensitivity of LCOE to doubling the price of coal, analogous to Table 7.15. LCOE is considerably less sensitive to coal price than to capital costs; the effect of doubling the price of coal on LCOE is comparable to that of increasing the capital cost by 30 percent.
When capital costs rise and are uncertain, utilities historically choose to build natural gas plants (NGCC), which can be erected quickly (3–4 years versus the more typical 4–8 years for coal-fired power plants)27 and require a much smaller commitment of capital. However, the competitiveness of natural gas power is vulnerable to a rising gas price, which can make this power too expensive to dispatch. Significant expansion of the use of natural gas for electric power generation in the