This paper studies a two-staged cleaning energy investment problem under uncertainty. It analyzes how a power generation firm may proceed with staged generation capacity investment and deployment of the carbon capture device through real options approach. The results indicate that, because of the variation fluctuation of electricity price, the investor tends to delay investing when the electricity price is lower, whereas the higher price-price ratio of CO2 and electricity is helpful for him to deploy ahead the carbon capture device, the main reason is that the yields from the sale of CO2 emission allowances can compensate him foe the higher operation cost of it.
This paper studies the effect of policy incentives on investment strategies of carbon capture and storage (CCS) technologies. We establish CCS investment models based on real options theory for investment value evaluation of CCS, which consider CO2 price, policy incentives and different CCS technologies that include the old existing CCS technology and the new one. We evaluate CCS investment option values and calculate the change of CCS investment values and thresholds due to the variation of CO2 price and policy incentives. We conclude that the optimal strategy is investing in the new CCS technology when there are enough policy incentives, otherwise, it is optimal to firstly invest in the old existing CCS technology and then upgrade to the new one.
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