Real Option Analysis on Carbon Capture Power Plants under Flexible Operation Mechanism

Developing a low-carbon economy is critical to cope with challenges incurred by global climate change. Decarbonisation of power generation plays an important role in CO2 emission mitigation. CO2 capture and storage (CCS) has been identified as a family of critical low carbon technologies, which allows the continued utilization of fossil fuels. However, the development of CCS is greatly restricted by the expensive cost issues in economy perspectives. On this basis, the main topic of this paper is focused on assessing the introduction of carbon capture systems in power plants. By examining the operation mechanism of carbon capture plant, a simplified bi-state operation pattern of carbon capture system is identified and defined. The "flexibilities" of carbon capture systems are equivalently taken as a series of "call options", and could be evaluated in a real option approach. Then, overall assessments integrating the values of call options are carried out. In order to illustrate the proposed approach, a numerical case is studied based on a typical coal-based carbon capture plant.