Evaluation of Two Alternative Carbon Capture and Storage Technologies: A Stochastic Model
AbstractIn this paper we evaluate two alternative CCS technologies of a coal-fired power plant from an investorÃƒÂ¢Ã‚â‚¬Ã‚â„¢s point of view. The first technology uses CO2 for enhanced oil recovery (EOR) paired with storage in deep saline formations (DSP) and the second one just stores CO2 in DSF. For projects of this type there are many sources of risk, and three sources of uncertainty stand out: the price of electricity, the price of oil and the price of carbon allowances. In this paper we develop a general stochastic model that can be adapted to other projects such as enhanced gas recovery (EGR) or industrial plants that use CO2 for either EOR or EGR with CCS. The model is calibrated with UK data and applied to help understand the conditions that generate the incentives needed for early investments in these technologies. Additionally, we analyse the risks of these investments.
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Bibliographic InfoPaper provided by BC3 in its series Working Papers with number 2013-07.
Date of creation: Mar 2013
Date of revision:
Publication status: Published
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Web page: http://www.bc3research.org/
carbon capture and storage; enhanced oil recovery; power plants; stochastic model; futures markets; real options.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-CWA-2013-03-16 (Central & Western Asia)
- NEP-ENE-2013-03-16 (Energy Economics)
- NEP-ENV-2013-03-16 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Lohwasser, Richard & Madlener, Reinhard, 2012. "Economics of CCS for coal plants: Impact of investment costs and efficiency on market diffusion in Europe," Energy Economics, Elsevier, vol. 34(3), pages 850-863.
- Gunnar Luderer & Valentina Bosetti & Michael Jakob & Marian Leimbach & Jan Steckel & Henri Waisman & Ottmar Edenhofer, 2012. "The economics of decarbonizing the energy system—results and insights from the RECIPE model intercomparison," Climatic Change, Springer, vol. 114(1), pages 9-37, September.
- Abadie, Luis M. & Chamorro, José M., 2008. "European CO2 prices and carbon capture investments," Energy Economics, Elsevier, vol. 30(6), pages 2992-3015, November.
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