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7.0 The Revenue Gap
The sections above have explored the potential revenues Trailblazer could receive for its two main products – electricity and CO2. The other side of the equation is the additional costs associated with constructing and operating a CO2 capture plant in addition to a greenfield coal-fueled electric generating station.
As indicated previously, Tenaska considers its revenue forecasts to be confidential and proprietary information. The same is true of its construction and operating costs. Even so, Tenaska is willing to provide some general information to help the Global CCS Institute’s members gain insights into the challenges facing projects such as Trailblazer.
In general, the addition of a carbon capture plant adds about 30 percent to a project’s capital costs. It adds somewhere around 10 percent to a project’s operating costs. Finally, and most importantly, operation of the carbon capture plant consumes a significant amount of the electricity (about 25% of net output) that otherwise would be available for sale (the energy penalty).
On the plus side, assuming a project is located where its captured CO2 is a saleable product and not a waste stream, the Project gains an additional revenue stream from CO2 sales. In the State of Texas, there are state and local incentives available to ACEPs that provide some additional revenue. However, the revenues achieved through CO2 sales plus available state and local incentives are not sufficient to make up for the increased capital and operating costs and the energy penalty caused by the carbon capture plant’s consumption of electricity. Figure 6.0 shows in a very general way the relative impacts a carbon capture plant has on costs and revenues.
Figure 6.0 – Revenue Gap
Figure 6.0 shows the current gap that needs to be filled in order for Trailblazer to be economic. Today, that gap can be filled in one of three ways:
- If oil prices continue to increase, CO2 revenues potentially could increase enough to bridge the gap;
- Electric prices could increase enough to bridge the gap; or
- Federal policies could change to bridge the gap. In the future, technological improvements and/or a reduced risk premium as technology matures also could help bridge the gap.