Getting Ready for Carbon Capture and Storage by Issuing Capture Options
Bibliographic Data
| ID | 4891775 |
|---|---|
| Authors | Xi Liang (0000-0002-0674-2246, University of Cambridge, corresponding author), David Reiner (0000-0003-2004-8696, University of Cambridge, corresponding author), Jon Gibbins (0000-0003-0963-4555, Imperial College London, corresponding author), Jia Li (0000-0003-0253-8544, Imperial College London, corresponding author) |
| Year | 2010 |
| Volume | 42 |
| Issue | 6 |
| Pages | 1286-1307 |
| Publication date | 2010-06-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Environment and Planning A Economy and Space (JOURNAL) |
| Journal identifiers | ISSN: 0308-518X • E-ISSN: 1472-3409 |
| Publisher | SAGE Publications Inc (PUBLISHER) |
| DOI | 10.1068/a42417 |
| OpenAlex | W2013801600 |
| Language | EN |
| Citations received | 2 |
| References cited | 10 |
A capture option is an option contract where the option holder can exercise a contract to retrofit an existing fossil fuel plant to capture carbon dioxide (CO2) on or before a fixed date. We suggest that new thermal power plants, particularly those in developing countries, consider issuing capture options at the design stage, because the sellers-the owners of newly built thermal power plants-may then invest in making these plants CO2 capture ready (CCR) to optimise returns from selling capture options. In a detailed case study on a 600 MW ultrasupercritical pulverised coal-fired power unit a potential storage site in Guangdong, China, the value of a capture option and CCR investment is evaluated using the backward deduction option pricing method through a stochastic cash flow model with Monte-Carlo simulations. If the power plant is retrofittable without CCR investment, then for an 8% discount rate the value of a capture option is US $11 million before CCR investment. Investing US $3.8 million in CCR increases the value of the capture option by an estimated US $12 million. Perhaps more important from a policy point of view, CCR investment can reduce the odds of early closure by 20% and also increase the chance of retrofitting to capture by 43%. If the power plant is not retrofittable in the absence of CCR design modifications, CCR investment to avoid 'carbon lock-in' is not only important for climate policy but is also economic from an investment point of view. We also conduct sensitivity analyses on a range of key assumptions to test the robustness of the findings
Business · Business model · Carbon tax · Cash flow · Climate change · Discounted cash flow · Economics · Environmental economics · Greenhouse gas · Microeconomics · Natural resource economics · Net present value · Odds · Option value · Present value · Retrofitting · Value capture · Atmospheric and Environmental Gas Dynamics · Climate Change Policy and Economics · Computer Science · Energy, Environment, and Transportation Policies · Engineering · Finance
| Unique citing works | 2 |
|---|---|
| Citations per year | 0,5 |
| Citation span | 2022 - 2025 (4) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 2 |