Modelling the investment in carbon capture retrofits of pulverized coal-fired plants

This paper focuses on the investment decision to retrofit an existing supercritical pulverized coal (SCPC) unit with carbon capture and storage (CCS) technology. We establish a valuation model with discrete sequential investment decision-making based on real options theory, and we consider the following uncertainty factors: electricity price, carbon price, CCS investment cost and CO₂ additional O&M cost. We also take CCS operation flexibility into account. We solve the model using the least squares Monte Carlo (LSM) method. We employ four indicators-cost saving value, investment risk, emission abatement amount and average capture rate-to evaluate the investment decision to retrofit China's existing SCPC unit with CCS. The results illustrate the following: (1) CO₂ capture (additional O&M) cost can be the most significant factor that will affect CCS retrofit investment; (2) the existing level of CCS technology and policy framework cannot support the plant owner to retrofit the existing SCPC unit with CCS; and (3) the carbon price or capture subsidy must be at a high level to control the CCS retrofit investment risk such that it is less than 5%. Our proposed model is most suitable for plant owners' CCS retrofit decisions.