Whether coal fired power stations are economically viable and has requested that you analyse and report on the economic viability of a new ultra super critical (USC) coal fired power station to be built . Specific details of the task are provided below.
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:
Business as Usual (BaU)
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.
Emission Intensity Scheme (EIS)
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.
Detailed information on the life, capital outlay, revenues, expenses and related information is provided in the ‘USC Information.xlsx’ file. The financial analysis is to be completed in Excel with the file being easily adjustable for different scenarios
General Information Detail Units Notes
Construction time 4 years Spread evenly over years of construction with outlay for each year occurring at the start of given year. Initial outlay at 2019.
Years of construction 2019-2022
Life after construction 35 years After plant is complete.
Output 743 MW 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
Emissions 0.7 t of C02-e/MWh
Capital cost 3076000 $/MW Note: Total Outlay = Output x Capital Cost per MW
Cost of fuel (black coal) 2.25 $/GJ Average from Graph
Heat rate 8.85 GJ/MWh
Variable fuel operating costs 19.91 $/MWh VC = $/GJ x Heat Rate.
Variable non-fuel operating cost 1.60 $/MWh
Fixed operating cost 87000.00 $/MW/year Note: Total Fixed Operating Costs = Output x Fixed Operating Cost per MW
Schedule maintenance 2.00 Weeks p.a.
Effective outage rate 5.00% p.a.
Available capacity factor 91.15% p.a. (52-Maintenance Weeks)/52 - Outage Rate
Coal inventory days 60 days Coal is stored on site
Coal inventory 213,04,782 $
Spare parts inventory 20,00,000 $
Working capital 233,04,782 $ Initial working capital investment occurs at the beginning of first full year of operations.
Depreciation Straight-Line Straight-line over operating life (life after construction)
Salvage - $ Assumed $0 due to costs of demolition
Site rectification 1000,00,000 $
Tax 30% Paid the year of income
Business as Usual (BaU) information
Price of electricity under BaU 85 $/MWh Average from Graph
Cost of capital under BaU 10.0% p.a.
Emission Intensity Scheme (EIS) information
Price of electricity under EIS 72 $/MWh Average from Graph
Cost of capital under EIS 10.0%
EIS baseline 0.6 t of C02-e/MWh Permits earned for year = Total Annual Output MWh x (EIS baseline - Emission per MWh)
Price per EIS permit first year production (2023) 17.71 $/permit Price of EIS permit is in first year of production as it takes 4 years to build power station (2019-2022)
EIS certificate annual compounded growth 5.7% p.a. Compounded growth
Hours 24.0 per day
Days 365.0 per year