Financial Analysis for Power Capture in the Identify Stage

Objective

To identify and document the main factors impacting the commercial aspects relating to the power and capture elements of the project.

Major Deliverables

Initial statement of the commercial parameters influencing the power and capture plant, including the influence from capture plant sizing and technology selection.  This will include forecasts for:

• Capital costs
• Carbon pricing
• Electricity pricing
• Fuel pricing
• Other product pricing (eg EOR, sulphur etc)
• Operating costs

Tasks

Specific tasks include the following: 

• Identification and enumeration of the likely capital cost range for each identified potential capture plant sizing and technology configuration
• Identification and enumeration of the likely flows of CO₂ during the operating phase of the project.  This will be dependent on the power capture plant sizing and hence the power plant economics and potential available funding to support ‘non-economic’ operation with CCS.   This information should be consistent with the ranges identified in the capture technology options, power plant operation profile and should be at an annual resolution
• Carbon price forecasts need to be articulated for a base case, upper and lower bound over the lifetime of the project.  This carbon price should take into account the different allowances that the project may receive or allow the power plant / CO₂ source to avoid.  It is likely to include forecasts on the likes of EUA’s, CER’s (or their replacement) etc.  The basis of the forecasts should be clearly documented identifying any reference sources and scenarios used to develop the forecasts 
• Expectations for introduction of carbon taxation, its likely range of values and the availability of any exemptions from this.  This may or may not be applicable to the project dependent upon the approach being taken in the jurisdiction that the project will be operating
• Fuel price forecasts need to be articulated for a base case, upper and lower bound over the lifetime of the project.  The forecast should take into account the supply and demand pressures over the project lifetime and external price reporting.  Wherever possible forward market prices should be used, although it is anticipated that these may be of limited validity for longer duration projects given limited liquidity over longer time horizons
• Electricity price forecasts to be articulated for a base case, upper and lower bound over the lifetime of the project. These electricity price forecasts should take into account new capacity being brought on line and capacity retirements over the lifetime of the project.  It is expected that the forecasts will take into account market pricing, although it is anticipated that these may be of limited validity for longer duration projects given limited liquidity over longer time horizons
• Price forecasts for other products that may be produced as part of the capture process (eg EOR, sulphur) need to also be articulated with a base case, upper and lower bound over the lifetime of the project.  These are likely to be stated as a current price with some assumptions for price inflation over the project lifetime – possibly on the basis of historic market price movements
• Identification and enumeration of the likely operating cost range (base case, upper and lower bound) over the lifetime of the project for each identified potential capture plant sizing and technology configuration
• Develop key financial outputs to assist key decisions around capture plant sizing and technology selection. These can include levelised cost of energy analysis ("LCOE"), project internal rate of return analysis ("IRR") and sensitivity analysis
• Initial high level funding outputs to assist development of funding plan (project IRR, equity IRR, debt service coverage ration, project life coverage ratio)

Examples 

Key Personnel

• Project Manager
• Commercial work-stream lead
• Cost estimation work-stream lead
• Finance work-stream lead