TY - JOUR
T1 - Investing in CO2 transport infrastructure under uncertainty
T2 - A comparison between ships and pipelines
AU - Knoope, M. M.J.
AU - Ramírez, A.
AU - Faaij, A. P.C.
PY - 2015/10/1
Y1 - 2015/10/1
N2 - The aim of this study is to assess whether the value of flexibility can influence the investment decision between CO2 ship and pipeline transport and, therefore, the way the infrastructure develops. For this, the value of a carbon capture and storage project are calculated with the standard net present value (NPV) and with the least-squares Monte Carlo method, which is a real option approach (ROA).Results of the NPV and ROA show that ships are preferred for small volumes over large distances. For instance, for a design capacity of 2.5Mt/y, pipelines are preferred for 250km and ships for 500km. The ROA shows that the option value to abandon the project and to switch off the CO2 capture unit temporarily are about 2-4 and 5 times as high for the ship compared to the pipeline configurations, respectively. The option to connect to another storage reservoir has a value of >1000M€ for the 10MtCO2/y configurations. Consequently, this option turns the project values positive for the 10MtCO2/y pipeline and shipping configurations over a distance of 250 and 500km.Overall, the value of flexibility did not change the preferred transportation mode from pipeline to ship transport, at least for the considered options to abandon the project, switch off the capture unit temporarily and switch to another storage reservoir. However, under the assumptions made, all 10MtCO2/y cases were not profitable with the NPV approach, while they were profitable with the ROA.
AB - The aim of this study is to assess whether the value of flexibility can influence the investment decision between CO2 ship and pipeline transport and, therefore, the way the infrastructure develops. For this, the value of a carbon capture and storage project are calculated with the standard net present value (NPV) and with the least-squares Monte Carlo method, which is a real option approach (ROA).Results of the NPV and ROA show that ships are preferred for small volumes over large distances. For instance, for a design capacity of 2.5Mt/y, pipelines are preferred for 250km and ships for 500km. The ROA shows that the option value to abandon the project and to switch off the CO2 capture unit temporarily are about 2-4 and 5 times as high for the ship compared to the pipeline configurations, respectively. The option to connect to another storage reservoir has a value of >1000M€ for the 10MtCO2/y configurations. Consequently, this option turns the project values positive for the 10MtCO2/y pipeline and shipping configurations over a distance of 250 and 500km.Overall, the value of flexibility did not change the preferred transportation mode from pipeline to ship transport, at least for the considered options to abandon the project, switch off the capture unit temporarily and switch to another storage reservoir. However, under the assumptions made, all 10MtCO2/y cases were not profitable with the NPV approach, while they were profitable with the ROA.
KW - CO transport
KW - Flexibility
KW - Pipeline
KW - Real option
KW - Ship
KW - Uncertainty
UR - http://www.scopus.com/inward/record.url?scp=84938398893&partnerID=8YFLogxK
U2 - 10.1016/j.ijggc.2015.07.013
DO - 10.1016/j.ijggc.2015.07.013
M3 - Article
AN - SCOPUS:84938398893
SN - 1750-5836
VL - 41
SP - 174
EP - 193
JO - International Journal of Greenhouse Gas Control
JF - International Journal of Greenhouse Gas Control
ER -