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Assessment of China's flexible power investment value in the emission trading system

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  • Lin, Boqiang
  • Liu, Zhiwei

Abstract

It has become widely recognized that renewable energy will play a central role in the country's power supply since the announcement of China's “carbon neutrality” goal. However, the inherent volatility of renewable energy sources such as wind and solar power poses risks to the stability of the power grid, necessitating the incorporation of flexible power solutions. In this study, we employ a real options method to assess the investment value of flexible power in China, specifically examining the viability of flexible coal power with carbon capture and storage (CCS) and battery energy storage systems (BESS), meanwhile, we consider the impact of the emission trading system (ETS). Results reveal that both flexible power solutions exhibit positive investment value at certain carbon price levels and with appropriate subsidies. Given the urgency of transitioning to a low-carbon economy, it is recommended that the government provide adequate subsidies to expedite the deployment of coal power with CCS and BESS, thereby facilitating the integration of flexible power. Furthermore, the establishment of an effective carbon market is crucial, as the carbon price significantly influences the value of flexible power.

Suggested Citation

  • Lin, Boqiang & Liu, Zhiwei, 2024. "Assessment of China's flexible power investment value in the emission trading system," Applied Energy, Elsevier, vol. 359(C).
    • Handle: RePEc:eee:appene:v:359:y:2024:i:c:s0306261924000461
    DOI: 10.1016/j.apenergy.2024.122663
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