Assessing the Value of Retrofitting Cement Plants for Carbon Capture : A Case Study of a Cement Plant in Guangdong, China

The cement manufacturing sector is the second largest source of anthropogenic greenhouse gas emissions in the world. Carbon Capture and Storage (CCS) is one of the most important technologies to decarbonise the cement manufacturing process. China has accounted for more than half of global cement production since 2008. This study suggests criteria to assess the potential to retrofit cementplants and analyses the economics of retrofitting cement plants for CCS with a case study of a modern dry process cement plant locating in Guangdong province, China. The study assumes the extra heat and power for CO2 capture and compression is provided by a new 200 MW combined heat and power unit (CHP) (US$17.5/MW h thermal for the cost of coal). The estimated cost of CO2 avoidance by retrofitting a cement plant for carbon capture in 2012 is US$70/tonne at a 14% discount rate with 25 years remaining lifetime. Through a stochastic cash flow analysis with a real option model and Monte Carlo simulation, the study found the value of an option to retrofit to be US$1.2 million with a 7.3% probability of economic viability. The estimate is very sensitive to the assumptions in the carbon price model (i.e. base carbon price is US$12.00/tCO2e in 2012 and the mean growth rate is 8%). The option value and the probability can reach US$20 million and 67% respectively, if a 10% mean carbon price growth is assumed. Compared with post-combustion carbon capture retrofitting prospect in existing coal-fired power plants, the economics of retrofitting cement plants to carbon capture is less attractive. However, given the uncertainties in climate policy, regulation and carbon market, new-build cementplants in China, with long lifetime, should consider an essential level of “CCS Ready” to reduce the cost of retrofit and keep the retrofitting option open