Innovation in the economic performance of a power station through monetised carbon dioxide credits

Abstract

It is proposed to generate part of the future base load power requirements of South Africa using nat-ural gas as a substitute for coal. By this substitution, combined-cycle gas turbine power stations will be built instead of pulverised fuel coal-fired power sta-tions to generate base load power. This substitution will lead to abatement in the emission of green-house gases, especially carbon dioxide.
In this paper, an innovative mode of amortizing capex is applied to reduce the payback time of a bank loan through the combined use of proceeds from the sale of electricity and monetised carbon dioxide credits. This innovation stems from the reduction in emission of carbon dioxide due to the proposal to generate part of the future base load power requirements using natural gas as a substitute for coal.
The carbon credits emanate from undertaking projects resulting in the reduction of greenhouse gas emissions under the Clean Development Mechan-ism of the Kyoto Protocol. This is possible because South Africa is regarded as a developing country. This additional revenue results in reducing the loan payments by 2.1 years, saving 19% in interest pay-ments. Furthermore, this innovation would allow scarce finance available for project funding to be extended to other projects to the advantage of national economic development.