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Investment decision on carbon capture and utilization (CCU) technologies—A real option model based on technology learning effect

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  • Liu, Jiangfeng
  • Zhang, Qi
  • Li, Hailong
  • Chen, Siyuan
  • Teng, Fei

Abstract

Carbon Capture and Utilization (CCU) technologies are crucial to achieving carbon neutrality targets. However, assessing the investment value and timing comprehensively is still challenging for CCU due to uncertainties in technologies and markets from a long-term perspective. In order to assist decision making, this work develops a new real option investment decision model based on the technology learning effect. In particular, the component-based two-factor technology learning curve approach is proposed to predict the future costs for each component. To verify this model, it is used to analyze two CCU processes, including the enhanced oil recovery using CO2 (CO2-EOR) and methanol synthesis from captured CO2 (CO2-MET). Results show that the proposed model can effectively predict the technology cost curve and find the optimal investment decision for the two applications considering various uncertainties. It is also found that the oil price at least needs to be over 80 $/barrel for CO2-EOR and the methanol price needs to be over 580 $/ton for CO2-MET respectively to trigger immediate investment. Comparatively, investing in CO2-MET projects is more economical than in CO2-EOR projects.

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  • Liu, Jiangfeng & Zhang, Qi & Li, Hailong & Chen, Siyuan & Teng, Fei, 2022. "Investment decision on carbon capture and utilization (CCU) technologies—A real option model based on technology learning effect," Applied Energy, Elsevier, vol. 322(C).
    • Handle: RePEc:eee:appene:v:322:y:2022:i:c:s0306261922008352
    DOI: 10.1016/j.apenergy.2022.119514
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    2. Feng Liu & Tao Lv & Yuan Meng & Xiaoran Hou & Jie Xu & Xu Deng, 2022. "Low-Carbon Transition Paths of Coal Power in China’s Provinces under the Context of the Carbon Trading Scheme," Sustainability, MDPI, vol. 14(15), pages 1-14, August.
    3. Tom Savage & Antonio del Rio Chanona & Gbemi Oluleye, 2023. "Robust Market Potential Assessment: Designing optimal policies for low-carbon technology adoption in an increasingly uncertain world," Papers 2304.10203, arXiv.org.
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    6. Christiano B. Peres & Pedro M. R. Resende & Leonel J. R. Nunes & Leandro C. de Morais, 2022. "Advances in Carbon Capture and Use (CCU) Technologies: A Comprehensive Review and CO 2 Mitigation Potential Analysis," Clean Technol., MDPI, vol. 4(4), pages 1-15, November.
    7. Bo Sun & Jiajia Tao, 2024. "Investment Decisions of CCUS Projects in China Considering the Supply–Demand Relationship of CO 2 from the Industry Symbiosis Perspective," Sustainability, MDPI, vol. 16(12), pages 1-25, June.
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    9. Wang, Yihan & Wen, Zongguo & Xu, Mao & Kosajan, Vorada, 2024. "The carbon-energy-water nexus of the carbon capture, utilization, and storage technology deployment schemes: A case study in China's cement industry," Applied Energy, Elsevier, vol. 362(C).

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