An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model
Carbon capture and storage (CCS) technology is an attractive technique to help power enterprises with carbon emission reduction. In this paper, a two-stage CCS retrofit investment in an existing coal-fired power plant in China including the first stage (demonstration project) and second stage (comme...
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| Format: | Article |
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MDPI AG
2018-07-01
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| Series: | Energies |
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| Online Access: | http://www.mdpi.com/1996-1073/11/7/1711 |
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| author | Herui Cui Tian Zhao Ruirui Wu |
| author_facet | Herui Cui Tian Zhao Ruirui Wu |
| author_sort | Herui Cui |
| collection | DOAJ |
| description | Carbon capture and storage (CCS) technology is an attractive technique to help power enterprises with carbon emission reduction. In this paper, a two-stage CCS retrofit investment in an existing coal-fired power plant in China including the first stage (demonstration project) and second stage (commercial operation) is taken as a case to decide when and whether to invest. Distinguished from previous models, a binomial lattice compound real options model including the options to defer and expand is established. Further, the accounting approaches to certified emission reductions (CERs) based on the thermodynamics principle are first proposed concerning this model. We find the total invest value under compound options model is less than zero, although greater than that by NPV method. The results indicate carbon prices and subsidy policy, respectively, play a dominating role in initiating the CCS investment at the first and second stage. The growth in government subsidy at the first stage has obviously greater effects on decreasing critical carbon trading prices. Besides, the minimum critical carbon price is 87.09 RMB/ton with full subsidy, greater than the current price (56 RMB/ton). This also illustrates it is not the optimal occasion to invest in a CCS retrofit project for power enterprises. |
| first_indexed | 2024-12-10T08:14:30Z |
| format | Article |
| id | doaj.art-20a264e5fd11455dae838ad02fd81d5c |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-12-10T08:14:30Z |
| publishDate | 2018-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-20a264e5fd11455dae838ad02fd81d5c2022-12-22T01:56:30ZengMDPI AGEnergies1996-10732018-07-01117171110.3390/en11071711en11071711An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options ModelHerui Cui0Tian Zhao1Ruirui Wu2Department of Economics and Management, North China Electric Power University, Huadian Road No. 689, Baoding 071003, ChinaDepartment of Economics and Management, North China Electric Power University, Huadian Road No. 689, Baoding 071003, ChinaDepartment of Economics and Management, North China Electric Power University, Huadian Road No. 689, Baoding 071003, ChinaCarbon capture and storage (CCS) technology is an attractive technique to help power enterprises with carbon emission reduction. In this paper, a two-stage CCS retrofit investment in an existing coal-fired power plant in China including the first stage (demonstration project) and second stage (commercial operation) is taken as a case to decide when and whether to invest. Distinguished from previous models, a binomial lattice compound real options model including the options to defer and expand is established. Further, the accounting approaches to certified emission reductions (CERs) based on the thermodynamics principle are first proposed concerning this model. We find the total invest value under compound options model is less than zero, although greater than that by NPV method. The results indicate carbon prices and subsidy policy, respectively, play a dominating role in initiating the CCS investment at the first and second stage. The growth in government subsidy at the first stage has obviously greater effects on decreasing critical carbon trading prices. Besides, the minimum critical carbon price is 87.09 RMB/ton with full subsidy, greater than the current price (56 RMB/ton). This also illustrates it is not the optimal occasion to invest in a CCS retrofit project for power enterprises.http://www.mdpi.com/1996-1073/11/7/1711carbon capture and storage (CCS)compound real optionsinvestment evaluationpower enterprise |
| spellingShingle | Herui Cui Tian Zhao Ruirui Wu An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model Energies carbon capture and storage (CCS) compound real options investment evaluation power enterprise |
| title | An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model |
| title_full | An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model |
| title_fullStr | An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model |
| title_full_unstemmed | An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model |
| title_short | An Investment Feasibility Analysis of CCS Retrofit Based on a Two-Stage Compound Real Options Model |
| title_sort | investment feasibility analysis of ccs retrofit based on a two stage compound real options model |
| topic | carbon capture and storage (CCS) compound real options investment evaluation power enterprise |
| url | http://www.mdpi.com/1996-1073/11/7/1711 |
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