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Applied Energy 322 (2022) 119514

Contents lists available at ScienceDirect

Applied Energy

journal homepage: www.elsevier.com/locate/apenergy

Investment decision on carbon capture and utilization (CCU)

technologies—A real option model based on technology learning effect
Jiangfeng Liu a, Qi Zhang a,* , Hailong Li b , Siyuan Chen c , FeiTeng a,d

a
School of Economics and Management, China University of Petroleum, Beijing, Changping, Beijing 102249, China
b
School of Business, Society & Engineering, Malardalen ¨ University, Vasteras, Sweden
c
School of Management and Economics, Beijing Institute of Technology, Haidian, Beijing 100081, China
d
National Science Library Chinese Academy of Sciences, Beijing, China

HIGHLIGHTS

• A new real option investment decision model is proposed based on the technology learning effect. •
The component-based two-factor technology learning curve approach is developed to predict the component costs. •
The oil price needs to be 80 $/barrel to trigger immediate investment for CO2-EOR. • The methanol price needs to be
over $580/ton to trigger immediate investment for CO2-MET. • The CO2-MET project is more economical and
geographically flexible than that of the CO2-EOR project.

ARTICLE INFO ABSTRACT

Keywords: Carbon Capture and Utilization (CCU) technologies are crucial to achieving carbon neutrality targets. However,
Carbon Capture and Utilization (CCU) assessing the investment value and timing comprehensively is still challenging for CCU due to uncertainties in
Investment decisions
technologies and markets from a long-term perspective. In order to assist decision making, this work develops a
Technology learning effect
new real option investment decision model based on the technology learning effect. In particular, the component
Enhanced oil recovery using CO2 (CO2-EOR)
based two-factor technology learning curve approach is proposed to predict the future costs for each component.
Methanol synthesis from captured CO2 (CO2-
MET) To verify this model, it is used to analyze two CCU processes, including the enhanced oil recovery using CO2
(CO2-EOR) and methanol synthesis from captured CO2 (CO2-MET). Results show that the proposed model can
effectively predict the technology cost curve and find the optimal investment decision for the two applications
considering various uncertainties. It is also found that the oil price at least needs to be over 80 $/barrel for CO2-
EOR and the methanol price needs to be over 580 $/ton for CO2-MET respectively to trigger immediate investment.
Comparatively, investing in CO2-MET projects is more economical than in CO2-EOR projects.

1.Introduction
According to the analysis of the International Energy Agency (IEA),
the global CO2 capture will reach 1.7 and 7.6 billion tons per year in 2030
and 2050 respectively [1]. The Carbon Capture and Utilization (CCU) is
one of crucial measures to achieve carbon neutrality target; and compared
to Carbon Capture and Storage (CCS), it can be more economically
attractive [2]. However, most of CCU technologies have not yet been
commercialized, and are facing the challenge of high capital and operation
and maintenance (O&M) costs [3]. Reducing the cost is critical to improve
future CCU investment value [4]. in addition,
the market uncertainty also affects the decision process of CCU projects,
which includes not only the electricity market, but also the market for the
products of CCU. For example, enhanced oil recovery using CO2 (CO2-
EOR) has been considered as CCU in many previous studies [3–5], even
though there is still a debate on if CO2-EOR is a CCS or CCU technology
because of its dual -role of using CO2 for enhancing oil recovery and
geological storage of CO2. In this work, it is also chosen as a CCU
technology. There are 51 global CCUS commercialization projects to be
commissioned before 2021, 28 of which apply CO2-EOR technology [6].
However, due to the volatility of the oil and methanol market, the revenue
is full of uncertainties, making it difficult to assess the CCU

*Corresponding author.
E-mail address: ZhangQi56@tsinghua.org.cn (Q. Zhang).

https://doi.org/10.1016/j.apenergy.2022.119514
Received 7 February 2022; Received in revised form 23 May 2022; Accepted 17 June 2022
Available online 28 June 2022 0306-2619/© 2022 Elsevier Ltd. All rights reserved.
Machine Translated by Google
J. Liu et al.
investment value accurately [7]. In addition, weak policy stimulus and
inadequate financial subsidies undermine investors' expectations, as well
as an incomplete regulatory framework for CCU [8]. All such issues make
it difficult for investors to accurately assess CCU's investment value, and
then make the optimal investment decision. Therefore, there is an urgent
need to develop an investment decision model for investors.
For this purpose, a new real option investment decision model was
developed in this study, which can consider the multi-dimensional
uncertainties of CCU projects. In particular, a component-based two-factor
technology learning curve approach is adopted in the investment decision
model to predict the future costs of the detailed components in different
technologies. It takes into account the learning-by-doing (LBD) effect
measured by cumulative output factor and the learning-by researching
(LBR) effect measured by cumulative patent applications.
In order to verify the effectiveness of the model, it is used to make the
investment decision for two CCU processes, CO2-EOR and methanol
synthesis from captured CO2 (CO2-MET). CO2-EOR is chosen because
it is one of the most common ways of CO2 utilization [9]. Meanwhile, due
to the strong need of decarbonization in the transportation sector, CO2
-MET has attracted growing attention. By 2021, there are 29 CO2-MET
projects of existing or planned facilities and technology providers all over
the world, including 7 projects with a scale of more than 100 000 t/ year.
Chauvy et al [10] also confirmed the methanol and methane production as
preferable CO2 conversion pathways. Therefore, CO2- MET is also
included. The objectives are to find the optimal investment timing and
investment value, and investigate the impacts of key factors on the
decision-making.
2. Literature review
2.1. Cost prediction of CCU
The costs, including capital and O&M costs, determine the feasibility
of energy technology projects, including CCU projects. The CCU chain
can generally be divided into CO2 capture, CO2 transportation, and CO2
utilization [7,11]. The technology learning curve has been commonly used
to predict the future costs of CCU [12,13]. For example, Lin and Tan [12]
applied this approach considering the LBD effect to predict the investment
and O&M costs for CO2 capture retrofitting. Marchese et al [13] applied it
with the consideration of the LBD effect to predict the cost of producing
Fischer-Tropsch (FT) waxes in the year 2030 and 2050.
The application of technology learning curve generally gives an overall
learning rate for the studied technology in above studies. How ever, a
complex technology can consist of several key sub-processes and
components, whose costs can also follow the learning curve theory. In
order to predict the cost more accurately, it is of importance to consider
the technology learning effect of each key sub-process or component [14].
The component cost curves can be subsequently aggregated to present
the cost of the complex technology [15].
The component-based learning curve has been used for predicting the
future costs of CCU technologies, however, current studies only consider
the LBD effect [13,16,17]. Kang et al. [16] applied the component-based
learning curve approach considering the LBD effect to analyze the future
cost of CO2 capture (CC) technology, which was decomposed into PC
boiler, air pollution controls and other key components. Ruttinger et al.
[17] applied the same approach for CO2-to diesel, which was broken-down
into syngas feed compressor, steam generation, reactor etc.
Furthermore, apart from the LBD effect, the LBR effect occurs in the
innovation process of a company by improving its R&D capability, which
enables the company to utilize knowledge capital more effectively, thus
improving the productivity and reducing costs [18,19].
However, the LBR effect is rarely considered in the component-based
learning curve approach in previous studies of CCU.
Therefore, to bridge these knowledge gaps, a component-based two
factor technology learning curve approach is proposed in the present
2
Applied Energy 322 (2022) 119514
study to predict future cost reductions in CCU technologies. Both the LBD
effect measured by cumulative output factor and the LBR effect measured
by cumulative patent application factor are included to improve the
approach.
2.2. Investment decision on CCU projects
The traditional methods of making investment decisions for energy
related projects can be classified as: i) Static investment theory, which
mainly includes the accounting rate of return method and the static
payback period method. Since it ignores the time value of cash flows and
does not consider changes in future project investment values, it may lead
to wrong investment decisions [20]; ii) Dynamic investment theory, which
can consider the time value of cash flow on a static basis
investment theory. It mainly includes the net present value method, the
financial internal rate of return method and the dynamic payback period
method. However, it cannot consider the impact of uncertainty on
investment decisions [21]; iii) Sensitivity analysis method, which is often
used to analyze the impact of a key variable change on the investment
decision of energy projects under an uncertain environment. This method
is useful to help investors find the most critical factors affecting the project
value, and to judge the change in project value by predicting changes in
critical factors. However, it assumes that the key variables are discrete
distributions and will not change with time, thus the considered uncertainty
is limited [22]; iv) Decision tree analysis method, in which the probabilities
of various change states of random variables are generally inferred from
the early or other similar project data and experience [23]. Generally
speaking, these methods have limited considerations of external
uncertainties, and ignore the value created by the manager's subjective
initiative [24]. The CCU projects have the characteristics of high uncertainty,
long payback period and high cost, hence, the above-mentioned traditional
investment decision methods are not suitable.
Moreover, Black and Scholes [25] proposed the famous Black Scholes
option pricing model, which laid the theoretical foundation for the birth of
real options. The real option theory is also known as the investment
decision making method under uncertain conditions, which believes that
both uncertainty and management flexibility create value in real assets,
and therefore should be fully considered by investors in the investment
decision making process [26,27] . In the real option method, the investment
values of energy projects fluctuate over time, and the investors have the
right to delay investment until the investment environment becomes more
favorable. Thereby based on the project characteristics, the investors'
rights in different stages can be considered in the real option method in a
much more flexible way. Myers and Turnbull [28] first applied the real
option theory to make investment decisions for enterprises, and it has
been applied broadly gradually since then [26,29,30].
Therefore, the real option method, which considers the effects of
uncertainty and management flexibility, is well suited to analyze the
investment decision of CCU projects. Currently, the real option method
has been widely used in previous studies to analyze the investment
decision of CCU projects in terms of market price uncertainties (considering
oil prices, carbon prices, etc.) and policy incentives (capital investment
subsidy, CO2 storage or utilization subsidies, etc.)
[12,26,31–33]. For example, Lin and Tan [12] proposed a deferred option
model to quantitatively evaluate the impact of low oil price shocks and
carbon trading mechanisms on CCU project investment value.
The results show that higher carbon and oil prices are needed to trigger
immediate investment. Zhu and Fan [26] established a CCUS investment
evaluation model based on real option theory considering uncertainties
from the existing thermal power generating cost, carbon price, etc. The
findings show that the current investment risks are relatively high. In
summary, previous studies only assume that the future costs decrease
with the LBD effect [12,34,35], or make sensitivity analysis on the
technology learning rate [11,36]. However, ignoring other effects, such as
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J. Liu et al.
Fig. 1. The framework of integrated model.
LBR effect, leaves the accuracy of above cost prediction results need to be
improved. In addition, there is no study integrating the component based
learning effect in the real option investment decision.
Therefore, as the key factor affecting the economics of CCU, the
accurate prediction of future costs considering the component-based
learning effect and its integration in investment decisions is still a big gap.
To bridge the gap, both LBD and LBR effects are introduced in the
component-based two-factor technology learning curve approach to predict
future capital and O&M costs more accurately. Furthermore, the above
learning curve approach is integrated in the real option investment decision
model first to improve the accuracy of investment decisions.
3. Methodology
3.1. Framework models
The model framework of the present study is illustrated in Fig. 1, which
can be divided into three parts. In step 1, the key components involved in
each technology are first identified according to the process flow diagram of
CCU, and then the future costs of each component are predicted using the
learning curve approach. In step 2, apart from the future costs of each
component, the prices of products are also the key factors affecting the
economics of the CCU project. Therefore, the uncertainties of the product
prices are represented by using Geometric Brownian Motion (GBM) or mean-
reverting process (MRP). In step 3, a real option model considering the
deferred option is developed and the investment decisions of CCU projects
are analyzed based on the results obtained in step 1 and step 2.
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Applied Energy 322 (2022) 119514
To demonstrate the effectiveness of the proposed integrated model, it
has been adopted to assist the investment decision for two CO2 utilization
technologies, CO2-EOR and CO2-MET.
3.2. Component-based two-factor learning curve approach
3.2.1. Process flow and key components of CCU technologies
As the key input of CO2 utilization technologies, CO2 needs to be
captured from CO2 sources. There are three CO2 capture (CC) pathways
that can be used in the power sector: (1) the post-combustion capture
pathway; (2) the pre-combustion capture pathway based on Integrated
Gasification Combined Cycle (pre-IGCC); and (3) the Oxy fuel combustion
pathway [37]. The post-combustion capture pathway has been considered
as the most feasible solution [16]. Therefore, it is selected in the present
study. The process flow and key components of the post-combustion capture
pathway are shown in Fig. 2a, which mainly consist of CO2 capture
component and CO2 compression component.
The CO2-EOR, as shown in Fig. 2b, includes a CO2 injection component
(consisting of CO2 pipeline transmission and injection wells), and a
production & separation component (consisting of extraction wells, product
handling and separation units) [7]. The CO2- MET, as shown in Fig. 2c,
includes a methanol synthesis component (consisting of the feedstock buffer
tank and methanol synthesis tower), and a purification & distillation
component (consisting of a high temperature heat exchanger, crude
methanol-water cooler and meth anol separator) [38,39] . Since hydrogen is
a key raw material of CO2- MET, a green hydrogen production component
based on the electrolysis of water is also included as a key component [39].
In addition, it is
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J. Liu et al. Applied Energy 322 (2022) 119514

Fig. 2. Process flow and key components of CCU technology.

assumed that hydrogen is obtained from an existing hydrogen
production plant instead of rebuilding a new plant in the present study. the experience ratio of LBD, c indicates the experience ratio of LBR, Qt
In addition, the technology readiness level (TRL) of CC [40], CO2-EOR
[4] and CO2-MET [10,41] have been assessed in several studies as
TRL 9, which means these technologies have entered the commercial
application stage. A new technology will start to be adopted as the first
of a kind (FOAK), and with the continuous application of technology,
an established technology can be considered as the Nth of a kind (NOAK) [42].
When FOAK technologies advance towards NOAK technologies,
learning effects will occur and reduce capital and O&M costs [43]. A
FOAK technology represents that it has entered the commercial
application stage and reached TRL 9, which means that learning
effects, such as LBD and LBR effects, occur only after the technology
reaches TRL 9. Given that the CC, CO2-EOR and CO2- MET
technologies have reached TRL 9, therefore, the learning effects can
be applicable in the three technologies.
The component-based two-factor learning curve approach is shown
in Eq. (1) [44]:
(1)
Ct = C0 × (Qt Q0 )b × (PTt PT0 )c
where Ct denotes the cost in year t, C0 is the initial cost, b indicates
is the cumulative outputs in year t, Q0 is the initial cumulative outputs,
PTt is the cumulative patent applications in year t, and PT0 is the initial
cumulative patent applications.
The learning rate (LR) is the cost reduction proportion with each
doubling of cumulative outputs, as seen in Eq. (2) [45]:
LR = 1 ÿ 2b (2)
The cost reduction potential of the whole technology system mainly
depends on the technology learning effect of the key components [14].
A complex technology can be considered as an integration of several
key components, wherein the cost of each component follows the
learning curve theory. The component cost curves can then be summed
up to present the overall technology cost [15]. In addition, the total
costs can be divided into capital costs and O&M costs. Furthermore,
different components have different learning rates. According to Eq.
(1), the capital cost and O&M cost could be modified as shown in Eq.
(3–8) [16]:

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J. Liu et al. Applied Energy 322 (2022) 119514

CC CC learning rates of capital and O&M cost of CC, CO2-EOR and CO2-MET
It =I 0
t 0 )b1 × (PTCC PTCC
(QCCQCC t )c10× caused by the LBR effect, respectively.
Stamp
1

=I
CC CC
+ I 0Comp 3.2.2. Prediction of key input parameters
0stamp
(QCCQCC PTCC QCC
t 0 )bCap 1 × (PTCC
Comp
t 0)c × 1 × (QCC
0 )bComp
t The cumulative product outputs and cumulative patent applications,
1
as the key input parameters to the technology learning curve approach,
PTCC
(3) need to be predicted firstly. The technology evolution S-curve concept
× (PTCC t0)c
model has been widely used as a theoretical model that can well
explain the relationship between life cycle theory and technology
EOR EOR
It =I0 evolution [46]. Therefore, the S-curve model is applied to predict the
QEOR
(QEOR t )bCI)b2
0 2 )cCI 2 ×PTEOR
× (PTEOR(PTEOR
t 0)c2 ×t ×
future cumulative product outputs and cumulative patent applications.
EOR EOR Its basic form is shown in Eq. (9) [46]:
=I 0CI + I 0CP 2 × (QEOR t )bCP
QEOR
0 (QEOR t PTEOR
0 QEOR0
T=
k/ b
(9)
1 + s × eÿ k(tÿ t0 )
PTEOR
(4)
2 × (PTEOR
0 t0
)cCP
)b3
where T denotes the technology performance index (it refers to the
cumulative product outputs and cumulative patent applications in the
Me Me
It =I0 present study) in year t, t0 is the initial time, and k denotes the fixed
QMe
0 )bMS 3
× )cMS
(QMe
(PTMe
t 3 t×)c3 ×PTMe
(PTMe(QMe
0t × t
growth rate. As t goes to infinity, T tends to be equal to k/ b, thus k/ b
Me Me
represents the maximum cumulative product output or patent
=I 0ms + I 0PD 0 )bPD 3 )cPD
t 3 × (PTMe t × (QMe application [47]. A constant s is used to adjust the initial value.
QMe PTMe
0 QMe PTMe
0
According to Schmidt et al [47], k/ b is based on the prediction of IEA
(5)
[1] or as consumption. k and s can then be fitted with the historical
data of cumulative product outputs or patent applications from the
O&MCC
t = O&MCC
0 literature [3] and the Derwent Innovation dataset by nonlinear
t 0 )b4 × (PTCC PTCC
(QCCQCC t )c40×
Stamp regression. Therefore, based on the current cumulative product
4
outputs and patent application data as well as the fitting values of k
= O&MCC + O&MCC
0Comp
0stamp
QCC
4 × (QCC
0 )bCap
(PTCC
t × t )c PTCC
0 and s, the future cumulative product outputs and patent applications can be pre
Comp
4
Comp
4 The S-curve with cumulative product outputs is shown in Eq. (10)
(6)
[46]:
(QCCQCC
t 0 )b × PTCC
× (PTCC t0 )c
TQ = kQ/ bQ
t (10)
1 + sQeÿ kQ (tÿ t0 )
O&MEOR = O&MEOR 0
t
× (QEOR t × (PTEORPTEOR
QEOR
0 )b5 t )c50 0 )bCI
where TQ
t denotes the cumulative product outputs in year t.
The S-curve with cumulative patent applications is shown in Eq. (11)
= O&MEOR0CI + O&MEOR0CP
t )cCPQEOR
55×)cCI
(PTEOR PTEOR
5 × (QEOR
t t × 0(PTEOR QEOR
× (QEOR t
0 )bCP 5 [46]:
kPT / bPT
TPT = (11)
t kPT (tÿ
PTEOR t0 ) 1 + sPT eÿ
0

(7) where TPT denotes the cumulative patent applications in year t. t

O&MMe
t = O&MMe
0
(QMeQMe PTMe
t 0t0×)bMS
)b6
(PTMe
× 6(PTMe
)cMS
t )cPD
t6)c6
×6 0(QMe
×× 3.3. The real option investment decision model

= O&MMe
0ms + O&MMe
0PD
× (QMeQMe0 )bPD
t )cHP
(PTMe6×t6 3.3.1. Investment of CCU project
QMe
(PTMe t PTMe
0
Maximizing the investment value is the decision objective of rational
investors. It implies that they will only invest when the current
+ O&MMe
0HP
0 )bHP 6
PTMe
0 QMe
× (QMe t PTMe
0 investment value is greater than the discount value of future periods;
(8) other wise, they will delay the investment. This investment timing
constitutes the main value of the deferred option [48]. Such a deferred
CC where EOR
t , I It Me and
t
I represent the capital cost of CC, CO2-EOR and option has been included into the investment decision model.
CO2-MET respectively, and O&MCC CC t, O&MEOR
t and O&MMe t represent the
Some key assumptions are introduced as follows: i) Considering
CC O&M
0Comp
cost.and
II 0Cap,
O&MCC O&MCC that most countries propose to achieve carbon neutrality before 2050,
0stamp, 0Comp represents the
the investment decision-making period in the present study is set
capital cost and O&M cost of the components (CO2 capture component
EOR between 2023 and 2050, with decisions made at the beginning of each
and CO2 compression component) in the CC technology.
0CI , I EOR
0CP and O&MEOR
I O&MEOR 0CP
0CI ,
year; ii) It takes 3 years for the project construction, the project can
represent the capital
injection cost and
component and O&M cost of&the
production two components
separation (CO2
component) in operate at full capacity after construction until the end of the project,
O&MMe and no salvage value is considered; iii) Investors can only make one
Me Me
the CO2-EOR technology. I 0ms, I 0PD and O&MMe 0ms, 0PD, O&MMe
0HP decision during the investment decision-making period. iv) The CO2
represent the capital cost and O&M cost of the components (methanol used for CO2-EOR or CO2-MET technologies can be stored or
synthesis component, purification & distillation component, and hydrogen converted for decades, which means that CO2 re-release into the
production component) in the CO2-MET technology. b1, b2, b3 are the atmosphere is not considered in the present study.
learning rates of capital costs of CC, CO2-EOR and CO2-MET caused The objective function is shown in Eq. (12) [12]:
by the LBD effect, respectively; b4, b5, b6 are the learning rates of O&M r×tD
OIV = max[max(TVt, 0) × eÿ ], (1 ÿ tD ÿ t0) (12)
costs of CC, CO2-EOR and CO2-MET, respectively; and c1-c6 are the

5
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J. Liu et al. Applied Energy 322 (2022) 119514

where OIV is the optimal investment value, tD is the optimal investment timing, TVt is = PCO2
t ÿCO2
t t
× QTCO2 (24)
the total value of the project in year t, r is the discount rate, and t0 is the investment
decision-making period.
PCO2 CO2
t trading
is thevolume
average
in carbon
year t. price in year t; and QTCO2 where
t
is the total
The total value and its net present value (NPV) in a given year during the investment
decision-making period can be calculated by using Eq. (13–15) [12]:
The total amount of CO2 captured per year can be expressed as Eq. (25) [12]:

eÿ r×(iÿ t1 ) (13) QCO2

t = QIC × Te × ÿ × fe × fc (25)
i=t1+1
TVt = E [ ÿLÿ t1 × CFi ÿ It ] , (1 ÿ t ÿ t0)
where QIC denotes the installed capacity of thermal power plant; Te is the annual
t1 = tc + t (14) operating hours of the thermal power plant; ÿ is the generation efficiency of power unit;
fe is the CO2 emission intensity of power generation; and fc denotes the carbon capture
r×t
NPVt = eÿ × TVt (15)
ratio. For CO2-EOR projects, all the CO2 is sequestered and there is a certain amount
of CO2 lost.
where L is the lifetime of thermal power plant; CFi is the net cash flow in the year i of
the operation period; It is the capital cost in year t of the project; tc is the construction QTCO2 t = QCO2 ÿ Qloss (26)
t t
period; and NPVt is the NPV of investment value in year t.
Qloss
t = ÿ × QCO2 ÿ EOR
t
(27)
The cash flow during the operation period includes revenue from products, carbon
trading revenue, revenue loss from electricity generation reduction due to CC retrofitting, where Qloss
t is the amount of CO2 leakage in year t, and ÿ is the CO2
and the variable costs of CC (including the O&M costs and CO2 transportation costs), leakage ratio.
as seen in Eq. (16–17) [12]: The revenue loss due to the reduction of power generation is calculated by Eq.
(28–30) [12]:

CFtEOR _ = ÿEOR + ÿCO2 ÿ Ce ÿ CCC (16) Cet = Pe × Qe ÿ PCoal × QCoal (28)

t t t t t t t t

CFt MET = ÿMe + ÿCO2 ÿ Ce ÿ CCC (17) = Qet × d (29)

t t t t QCoal
t

where ÿEOR is the profit of CO2-EOR in year t; ÿMe is the profit of CO2- MET in year t; (30)
t t Qet = ÿ × QIC × Te × ÿloss
ÿCO2 is the profit of carbon
t trading inreduction
generation year t; Ceinisyear
the t;revenue loss
and CCC is of
theelectricity
variablet of
costs
the
where Pe is the average electricity feed-in tariff in year t; Qe is the power
CC in year t. t t t

generation loss due to CC retrofitting in year t; ÿloss is the loss of generation efficiency;
For CO2-EOR, the profit can be further calculated by Eq. (18–20) [12]: PCoal is the average coal
t price
the in year
lost t; QCoal
electricity inisyear
the t;coal
andconsumption t required
d is the coal for
consumption
per kWh.

ÿEOR = REOR ÿ O&MEOR (18)

t t t
The variable costs of CC are calculated by Eq. (31–32) [12]:

REOR = PEOR × QEOR (19) CCC = O&MCC + CT (31)

t t t t t t

QEOR = CEreplace × QCO2 ÿ EOR

(20) CTt = QCO2 (32)
t t t × CCO2T t_

where is REOR is the oil recovery revenue in year t; O&MEOR is the O&M cost of CO2- where O&MCC is the O&M cost of the CC in year t; CT is the average CO2 transportation
t t t t

EOR in year t; PEOR is the oil pricet in year

QCO2ÿ
t; QEOR
EOR is the oil
amount
production
of CO2
t in used
year
CO2-EOR
t;in the cost of CO2 in year t; and CCO2 T is the transport cost
t per ton of CO2 in year t.
in year t; and replace is the t CO2 replacement
used annually
efficiency
for CO2-EOR
of oil [11].isThe
limited
amount
by the
of total
CO2
amount of CO2 captured annually. The reference capital cost of CC, CO2-EOR and CO2-MET is I CC
t,
I EOR
t
,
I Me respectively in Eq. (33) [12]:
t

CC EOR Me
It = I +I +I (33)
For CO2-MET projects, the profit is calculated by Eq. (21–23) [49]: t t t

ÿMe = RMe ÿ O&MMe (21)

t t t 3.3.2. Modeling the uncertainties of market prices
The profits of the CCU project will be greatly affected by the prices of crude oil,
RMe = PMet ×QMe t (22)
t methanol, and CO2 trading, which have high uncertainties.
Pindyck [51] concluded that the GBM stochastic model can provide robust approximations
QMe
t = a × QCO2 ÿ Me
(23)
t and do not generate significant evaluation errors.
The GBM model can simply and accurately describe the random walk process of
where is RMe
t is the methanol sale revenue in year t; O&MMe is the tvariable costs of the commodity prices in early markets and has been widely used [52–54]. However,
CO2-MET project in year t; PMe is the annual average methanol
t the methanol
price in year
production
t; QMeinis according to classical economics, as the market matures, commodity prices always
year t; a is the conversion rate of tCO2used
to methanol; QCO2ÿ Me
for the CO2-MET is the
in year amount
t, which is of CO2
limited fluctuate around a certain value that tends to equilibrate. To represent this motion
by the total amount of CO2 captured annually; and O&MMe
t isCO2-MET
the O&M costs
projectofinthe
year process, the MRP is proposed and has been advocated to characterize crude oil prices
t. in many studies [12,55,56]. Therefore, the MRP is applied to simulate uncertainty of
crude oil prices, while the GBM is applied for methanol price simulation in the present
t
study.
The National Unified Carbon Market has been established in many countries. Using
China's carbon market as an example, revenue from carbon trading can be calculated
by Eq. (24–27) [50]: (1) Oil price uncertainties

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Table (2) Methanol price uncertainties

1 Description of main parameters.
Value Source For the methanol price uncertainty [27]:
Parameter Descriptions

Qgross the gross power output of the 600 MW dPMet

t
= DRMet × PMet dt + VMet × PMet dzMet
t t t
(35)
[12]
thermal power plant the net
qnet power output of the thermal 570 MW
[12] ln(PMet / PMet1)
power plant the net power output DRMet t tÿ
(36)
QIC 389 MW = ÿt
of the thermal power plant after
[66]
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ

CC retrofitting n 1
Te the annual utilization hours of 7165 h
[67] 1 ÿÿ 2 ÿÿ [ ln(PMet
PMet PMet
tÿt 1 ) ÿ ln(PMet t tÿ 1 ) ]2
t=1
thermal power plant the CO2 VMet = (37)
762 ÿÿÿÿÿ
ÿt
fe emission intensity of power
[12]
generation gCO2/
kWh where DRMet is the drift rate of methanol price; VMet is the volatility of methanol prices; and dzMet
fc the carbon capture ratio 90%
[12] denotes the independent increment
t
of the Wiener process.
ÿ
the efficiency of power units is 94%
[12]
t0 the investment decision 15 years
[12] (3) Carbon price uncertainties
making period the lifetime
L of thermal 35 years
[12]
power GBM is suitable for describing variables that have a significant
tc
the construction period 3 years upward or downward trend, rather than fluctuating around an average
[12]
replace the CO2 replacement 0.2 price. Given that achieving the carbon peak by 2030 in most counties,
[11]
efficiency of oil the present study assumes that there will be a significant upward or
EOR
I1 The reference capital 7.4 $/t downward trend in carbon prices before 2030, which is suitable to be
[62]
investment of CO2-EOR CO2
Me simulated by the GBM model; after 2030, the carbon market will
I1 The reference capital $5.9
investment of CO2-MET million
[64] become a mature market and carbon prices will fluctuate around a
O&MCC
t
the reference O&M cost of the 49.4 certain value, which is suitable to be simulated by the MRP model, as
[16]
CC $/MWh seen in Eq. (38–41) [55,57]:
O&MEOR
t
the reference O&M cost of 7.2 $/t
[62]
the CO2-EOR CO2 653 dPCO2t = DRCO2 × PCO2
t
dt + VCO2 × PCO2t dzCO2t (38)
before2030
O&MMe
t
the reference O&M cost of $/ton
[39]
the CO2-MET
d the coal consumption per 0.4 kg/ ln(PCO2 t / PCO2 )
kWh
[12] DRCO2 =
tÿ 1
(39)
kWh of a thermal power plant ÿt
the loss of generation
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ

ÿloss efficiency the CO2 leakage 31.8%

[16] n 1
ratio of t t
ÿ 90% 1 ÿÿ 2 ÿÿ PCO2 PCO2
t=1 [ ln( PCO2
tÿ 1 ) ÿ ln( PCO2 tÿ 1 ) ]2
CO2-EOR project
[62] VCO2 = (40)
ÿÿÿÿÿ ÿt
r discount rate 8%
[55]
a
the conversion rate of CO2 to 0.7 where DRCO2 is the drift rate of carbon price; VCO2 is the volatility of carbon prices; and dzCO2
[39]
methanol the long-term mean is the independent increment of the Wiener
t
PEOR of the crude oil price the 69.7$/ Calculated by author process.
reference average methanol barrel according to WIND
PMe price the reference average 373$/tonne database; [12]
1
dPCO2 = ÿCO2 (PCO2 ÿ PCO2
t
) × PCO2
t
dt + ÿCO2PCO2t dzCO2
t
(41)
carbon price the mean-reversion t after2030
PCO2
1 speed the volatility rate of oil 8.6$/ton
where ÿCO2 is the mean-reversion speed; PCO2 is the long-term mean of
price the drift rate of methanol
ÿEOR 0.149 the carbon price; and ÿCO2 is the volatility rate of the carbon price.
ÿEOR 0.331

3.3.3. Model solving method

DRMet 0.005
Monte Carlo simulations are often used to analyze the decision
price
VMet the volatility of methanol price 0.021 flexibility in delaying investment [12]. However, most Monte Carlo
the drift rate of carbon price methods cannot price American-type options and therefore determine
DRCO2 0.04 the volatility of carbon 0.03 price the the optimal investment timing. In particular, the least squares Monte
VCO2 mean-reversion speed Carlo model (LSMC), first proposed by Longstaff and Schwartz [58],
1.6
can be used in pricing American options considering multiple
ÿCO2
[55] uncertainties and decision timing over multiple time steps. The basic
CCO2
t T the average transport cost per 21.7$/t principle of LSMC is: At a limited number of discrete time points,
[12]
tonne of CO2 CO2 1430
CC according to the cross-sectional data of the simulation sample path of
I1 The reference capital
investment of CC $/kW
[16] the underlying asset price at each time, use the least square regression
retrofitting to obtain the expected return of continuing to hold the option, and
compare it with the return of immediately executing the option at that
time. If the latter is greater than the former, immediately execute the
The oil price uncertainty can be expressed by Eq. (34) [55]:
option, otherwise, continue to hold the option. The basic steps of
dPEOR = ÿEOR(PEOR ÿ PEOR ) × PEOR dt + ÿEORPEOR dzEOR (34) LSMC are as follows: First, generate the sample path of the underlying
t t t t t
asset price. Secondly, the optimal option execution time and the
where ÿEOR is the mean-reversion speed; PEOR is the long-term mean of the crude oil price; corresponding option return on each sample path are obtained by
and ÿEOR is the volatility rate of the carbon price. reverse solving from the option expiration date. Finally, the option return of each

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Table
2 Assumed production capacity of three technologies.
Technology Assumed annual production capacity
CC
2700 kt CO2
CO2-EOR 550 kt crude oil
CO2-MET 1900 kt of methanol
discounted with the risk-free interest rate, and then their mean value is
taken to obtain the simulated option value [58]. The LSMC model has
been widely used to solve option values and to make investment decisions
in energy technology projects [46,59,60]. Therefore, the LSMC method is
applied to solve the investment decision model in the present study.
The real option investment decision model has been implemented in
Matlab software.
4. Key data and scenarios
4.1. Data
The main parameters for the case study are listed in Table 1. It is
assumed that the thermal power plant will be phased out by the end of
2060. Since the decision-making period ends in 2050, the CCU project
has at least 10 years of project implementation period. The information of
the studied thermal power plant is taken from Lin and Tan [12].
The various costs and technology learning rates of the CC technology
are determined according to the literature. The reference capital in
vestment of the capture plant is US$1430/kW, the O&M cost excluding
fuel is US$29.7/MWh, and the additional fuel cost due to CC is US$19.7/
MWh [16]. Component cost proportions of the CC system are obtained
from the demonstration project survey and the calculation of Kang et al
[16]. The technology learning rates of key components follow the
International Energy Agency Greenhouse Gas R&D Program (IEAGHG)
[61].
The costs of CO2-EOR are taken from Zhang's study [62]. The number
of injection wells and production wells are 138 and 392, respectively, and
a net CO2 injection volume of 7766.3 t/d can be achieved. The CO2-EOR
cost is 14.6 US$/t CO2, in which the capita and O&M costs account for
50.9% and 49.1%, respectively. In addition, although CO2-EOR and CO2-
MET have the same TRL, CO2-EOR technology has entered the
commercial application stage earlier than CO2- MET for decades
[ 3,4,10 ]. With the continuous accumulation of technological scale from
FOAK to NOAK, the reduction of capital and O&M costs will be greater,
while the decline rate of its future costs will get smaller [43]. Therefore,
CO2-EOR has a lower technology learning rate than CO2-MET. The
learning rates of CO2-EOR refer to the oil & gas industry component used
for CO2 storage [63].
The data of CO2-MET are taken from a real planned project in
Changshou Chemical Park, Chongqing [64]. The plant can produce
35,000 tons of methanol per year, and the capital cost is about $5.9
million. The O&M cost refers to the research of Sealand Securities where
the feedstock cost (mainly hydrogen) is 595 $/ton, and the manufacturing
cost (including labor, depreciation and other manufacturing costs) is 58 $/
ton [39]. Hydrogen is treated as a key feedstock for methanol production,
which is obtained from an existing hydrogen production plant instead of
rebuilding a new plant in the present study. Since the O&M cost of
methanol production is mainly the hydrogen production, the learning
effects of the O&M cost of hydrogen production are discussed in the
present study [39].
The reference crude oil price is set at 69.7 $/barrel, which is derived
from the OPEC oil price package between Dec 26, 2001 and Dec 7, 2021.
The reference methanol price is set at 373 $/ton, which is derived from
the methanol (premium grade) price data between Dec 31, 2013 and Dec
10, 2021. the carbon price data is adopted from Beijing's emission trading
market between Nov 29, 2013 and July 8, 2021, and the reference carbon
price is set at 8.6 $/ton. The above data comes from the
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WIND database [65]. And the drift and volatility rates of these prices are
estimated based on the above data.
The future cumulative capture capacity of CC is equipped based on
the prediction of IEA [1]. The cumulative CO2 utilization/injection of
existing CO2-EOR projects is referred to the development path of
cumulative product outputs of the Chinese Academy of Environmental
Planning (CAEP) for CO2-EOR [3]. For CO2-MET, the cumulative
production capacity of the global CO2-MET is taken as the cumulative
product outputs. In addition, the cumulative patent applications for the
three technologies are obtained from the Derwent Innovation dataset.
The cumulative product outputs, cumulative patent applications and
learning rates are used as the input data of the technology learning curve
approach to predict the future capital and O&M costs, which will be used
as the input data of the investment decision model.
Based on the data in Table 1 and the quantitative relationship
between power generation and carbon emissions in Eq. (25), it is
calculated that the annual CO2 captured from the assumed thermal
power plant is about 2632.8 kt. It is assumed that all captured CO2 will
be used in either CO2-EOR or CO2-MET, therefore, the production
capacities of these two projects can be determined based on the amount
of captured CO2. Considering an efficiency of 20% for the replacement
of oil by CO2, the annual crude oil production capacity of CO2-EOR is
526.6 kt. Based on the carbon balance and an efficiency of 70% for the
conversion of CO2 to methanol, the annual methanol produced is 1843.0 kt for CO2-
To ensure that all the emitted CO2 can be captured and utilized, the
assumed production capacities of the CC, CO2-EOR and CO2-MET
technologies should be larger than the calculated capacities, as shown in
Table 2, and their assumed production capacities are equivalent to that
of real large-scale projects of relevant technologies.
4.2. Scenarios
The technology learning rate can be affected by many factors. For
example, factors affecting the learning rate of LBD mainly include the
improvement of staff working ability, management improvement,
equipment quality, etc [36,68]; while factors affecting the learning rate of
LBR mainly include the reserve of knowledge, the breakthrough of key
theory or technology research, etc [19]. Three technology learning
scenarios are set to consider the volatility of the technology learning rate
in the present study, as shown in Table 3.
The literature on the learning rates of similar technologies is reviewed
to obtain the technology learning rates for CO2-EOR and CO2- MET .
Since the learning rate is the proportion of the cost reduction with each
doubling of cumulative outputs, a higher learning rate represents a faster
rate of cost reduction. The previous studies estimating learning rates for
energy technologies have found that the learning rate of LBD is higher
than that of LBR in most cases. For example, Lohwasser and Madlener
[69] estimated that the learning rate of LBD was about 7% higher than
that of LBR. Miketa and Schrattenholzer [70] estimated this difference to
be about 40% for solar PV technology. Due to the lack of data on the
learning rates of LBR for CCU, assumptions are based on previous
studies that the learning rate of LBD is 20% higher than that of LBR.
Moreover, the learning rate of O&M costs is often higher than that of
capital costs [71]. For example, 11% and 22% were used as learning
rates of capital costs and O&M costs for flue gas desulfurization (FGD) [72].
The learning rates of LBD for CC technology in three scenarios refer
to Kang et al [16] and the IEAGHG [61]. In addition, the literature on the
learning rates of similar technologies is reviewed to obtain the technology
learning rates for CO2-EOR and CO2-MET. The learning rates of LBD for
CO2-EOR in three scenarios refer to Upstill and Hall [63]. As for CO2-
MET, the learning rates are calculated based on the scaling factors
according to Eq.(2) [41], which is much higher than other literature and
sets as the learning rates in fast technology learning scenarios. In
addition, the learning rates of methanol synthesis and distillation in the
study of Lin et al [73] are relatively lower and set as the learning rates in
slow technology learning scenarios. The technology
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Table
3 Learning rates of different components.

Components Capital costs O&M costs Learning-by-doing rate Learning-by-researching rate References

% Total % Total Capital cost 1 O&M costs Capital costs O&M costs
(S/M/F) (S/M/F) (S/M/F) (S/M/F)

CC CO2 capture (amine system) 81.8 95.2 0.06/0.11/0.18 0.10/0.22/0.30 0.00/0.00/0.10 0.048/0.088/0.144 0.08/0.176/0.24 0.00/0.00/0.08 [16,61]
CO2 compression 18.2 4.8 0.00/0.00/0.10 0.03/0.036/0.042
0.04/0.048/0.056 0.00/0.00/0.08 [16,61]
CO2-EOR Injection system 50 25.73 0.024/0.029/0.034 0.03/0.036/0.042 0.04/0.048/0.056 0.05/0.06/0.07 0.04/0.048/0.056 -/-/- [63] [63]
Production & separation system 50 74.27 0.16/0.18/0.21 0.14/0.16/0.18 0.05/0.10/0.15 0.22/0.28/0.34
0.03/0.036/0.042
0.18/0.22/0.27 0.06/0.11/0.16
0.24/0.30/0.31/0.31 [74]
– – -/-/- 0.04/0.08/0.12 [41,73]
CO2-MET Hydrogen production
MeOH synthesis 90 27.33 0.048/0.088/0.13 [41,73]
Purification & Distillation 10 72.67
1
Note: S/M/F represents the learning rates in different scenarios. Specifically speaking, S-Slow technology learning scenario; M-Medium technology learning scenario;
F-Fast technology learning scenario.

Fig. 3. The capital cost prediction of key components under different scenarios.

learning rates for key components in different scenarios are shown in Table making. Therefore, this section analyzes the results of future cost predictions.
3.

5. Results and discussion 5.1.1. Future cost prediction of key components in different scenarios
The capital costs of different key components in different scenarios are
5.1. Future cost predictions shown in Fig. 3. In the slow/medium/fast scenarios, the CO2 capture
component has the largest cost reduction potential by 2060, with a cost
Since the cost is a key part of investment value, the prediction of future reduction rate of 34.7%/55.1%/74.3%, respectively. As for CO2-EOR
costs has an important impact on the investment decision technology, its two components' costs decrease in a similar trend and at

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J. Liu et al.
Fig. 4. O&M cost prediction of key components under different scenarios.
a slower rate. In different scenarios, by 2060, the costs of the injection
component and production & separation component will decrease by
17.7%/20.9%/24.1%, and 22.6%/26.6%/30.3%, respectively. As for CO2-
MET technology, the methanol synthesis component has the largest cost
reduction potential (about 1.9/2.6/3.2 million $) and the fastest cost
reduction rate (about 35.2%/49.2%/60.7%) by 2060 in different scenarios,
respectively.
The O&M cost of different key components in different scenarios are
shown in Fig. 4. The CO2 capture component has the largest cost reduction
potential and the fastest cost reduction rate by 2060, with the cost reduction
of 6.7/8.8/10.2 $/MWh and the cost reduction rates are 51.5%/67.2%/
78.3% in the slow/medium/fast scenarios, respectively.
As for the CO2-EOR technology, the production & separation component
has the largest cost reduction potential and the fastest cost reduction rate
by 2060, with a cost reduction of 3.0/3.5/4.0 $/t CO2 and the cost reduction
rates are 27.9% /32.7%/37.1% in different scenarios, respectively. As for
the CO2-MET technology, the hydrogen production component has the
largest cost reduction potential and the fastest cost reduction rate by 2060,
with a cost reduction of 293.1/361.1/469.0 $/ton and the cost reduction
rates are 49.2%/60.7 %/78.8% in different scenarios, respectively.
5.1.2. Future cost prediction of entire technology
The capital cost and O&M cost of the CC, CO2-EOR and CO2-MET
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technology in different scenarios are shown in Fig. 5. By 2060, the capital
cost of the CC technology will decrease by 28.4%/45.1%/70.2% and the
O&M cost will decrease by 49.1%/64.0%/77.0%, respectively.
As a relatively mature technology, the cost of CO2-EOR decreases slowly.
By 2060, the capital cost will decrease by 20.2%/23.8%/27.2% and the
O&M cost will decrease by 26.6%/31.1%/35.4% respectively. In contrast,
CO2-MET has a larger technology learning effect, and by 2060, the capital
cost will decrease by 34.4%/48.6%/60.1% and the O&M cost will decrease
by 49.1%/62.2%/79.3%, respectively. Furthermore, CC technology has the
greatest capital cost reduction potential, while the CO2-MET technology
has the greatest O&M cost reduction potential.
5.2. The impacts of prices on investment decisions in different scenarios
The impacts of prices on optimal investing time and corresponding
investment value are analyzed in this section. in Fig. 6, the NPVIV
represents the investment value calculated by the NPV method, while the
ROIV represents the optimal investment value calculated by the real option
investment decision model. In the NPV method, an investor will only invest
when the NPVIV is greater than zero, and can only make decisions in
2023 (the first period of the decision-making period).
However, In the real option investment decision model, the introduction of
deferred option allows investors to make decisions at any time.
The impacts of oil and methanol prices on investment decisions for
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Fig. 5. Future cost prediction in different scenarios.

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J. Liu et al.
Fig. 6. The impacts of prices on investment decisions in different scenarios.
CO2-EOR and CO2-MET projects in different scenarios are illustrated in
Fig. 6, from which the optimal investment value (red star) under the
reference price can be easily identified, if an investment must be made.
The bars titled NPVIV represent the investment value calculated by
using the NPV method, while the bars titled ROIV represent the optimal
investment value over the decision period after introducing the deferred
option. The curve represents the optimal time to invest or not to invest.
Under the reference price condition, investing neither CO2-EOR nor
CO2-MET projects will not happen in slow and medium technology
learning scenarios. However, with the enhance of technology learning
effect, in the fast technology learning scenario, for both CO2-EOR and
CO2-MET, the investment becomes worth it and their optimal investment
value can reach about $217.4 million and $387.9 million respectively. In
addition, from the slow scenario to the fast scenario, the investment
value of CO2-MET will gradually surpass that of CO2-EOR. It implies
that with the enhancement of learning effect, CO2-MET has a greater profit
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growth potential and is even more economical than CO2-EOR.
As shown in Fig. 6, the ROIV is higher than the NPVIV. The reason
is that the introduction of deferred options allows investors to delay
investing if the current project is not profitable, and choose to invest
when the investment value is the highest and positive. These results
demonstrate the superiority of the proposed model in investment
decision-making.
For CO2-EOR, the investment value will increase as oil prices rise.
In order to achieve a positive investment value, the oil price at least
needs to be over 110 and 60 $/barrel in the slow and fast technology
learning scenarios. In addition, to trigger immediate investment in 2023,
in the medium and fast scenarios, the oil price at least needs to reach
110 $/barrel and 80 $/barrel respectively.
For CO2-MET, in order to achieve positive investment value, the
methanol price needs to be over 580 $/ton in a slow technology learning
scenario. However, in the fast technology learning scenario, that is enough
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when the methanol price reaches 300 $/ton (20% lower than current
price). Moreover, as a widely used chemical product, methanol will be in
greater demand in the chemical and transportation sector. However, in
order to trigger immediate investment, the methanol price needs to be
over 580 $/ton in the fast technology learning scenario, and the required
price growth rate is 40% higher than that of CO2-EOR. This is because
the upfront cost of CO2-MET is higher than that of CO2-EOR, and thus it
is better to delay the investment of CO2-MET to obtain higher profits.
Comparing the investment decisions between CO2-EOR and CO2-
MET in different scenarios (Fig. 6a vs 6d; Fig. 6b vs 6e; and Fig. 6c vs
6f), in different scenarios, the ROIV of CO2-MET is about 1.6 times of that
of CO2-EOR with the same growth rate in prices. In addition, in order to
achieve positive investment value, the growth rate of price required for
CO2-MET is 3%, 6%, and 6% which is lower than that of CO2-EOR.
These results indicate that CO2-MET is more economical than CO2-EOR.
However, due to the higher upfront costs, CO2-MET is more difficult to
trigger immediate investment than CO2-EOR, therefore it is better to
invest in it in the long term.
options will be considered in the future work. Due to the lack of available
historical data such as the cost of technology, the technology learning
rates used in analysis are obtained from the literature and some of the
assumptions were also introduced. It is suggested we will continue to
investigate the relevant data in the future to improve the accuracy of the
results. Meanwhile, the comparison between the impacts of LBD and LBR
effects on cost reduction is also suggested for the future work. In addition,
it is also important to take into account the factors such as geographic
location, geological storage potential and regional heterogeneity in the
future work.
Credit authorship contribution statement
Jiangfeng Liu: Data curation, Software, Visualization, Writing –
original draft, Formal analysis. Qi Zhang: Conceptualization, Supervision,
Funding acquisition, Writing – review & editing. Hailong Li: Methodology,
Investigation, Writing – review & editing. Siyuan Chen: Methodology,
Investigation. Fei Teng: Data curation, Investigation.

6. Conclusions
Declaration of Competing Interests
CCU is crucial to achieving carbon neutrality targets, however, the
The authors declare that they have no known competing financial
high capital and O&M costs as well as the high uncertainties of oil or
interests or personal relationships that could have appeared to influence
methanol prices hinder its development. A new real option investment
the work reported in this paper.
decision model based on technology learning effect is developed to
analyze the investment decisions of CCU projects, and a component
based two-factor technology learning curve approach is proposed to Acknowledgment
predict the future costs for each detailed component. Through using this
method to analyze two CCU technologies, CO2-EOR and CO2-MET, the The authors gratefully acknowledge the support provided by the
following conclusions can be drawn from the results: National Social Science Foundation of China (No. 21ZDA030) and
National Nature Science Foundation of China (No.71974197).
• The investment decision model can reveal the investment potential of
CCU projects and find the optimal time for investment, thanks to the Appendix
consideration of the investors' management flexibility. • Under the
reference price condition, neither CO2-EOR nor CO2-MET is worth The projects of CO2-EOR and CO2-MET are listed in the Appendix
investing immediately. • The increase in oil price contributes (Table A1 and Table A2).
significantly to the investment value of the CO2-EOR. In order to trigger
immediate investment in 2023, in medium and fast scenarios, the oil Table
price at least needs to be over 110 $/barrel (54% growth rate) and 80 A1 The specific projects of CO2-EOR in China [3].
$/barrel (15% growth rate) respectively, which is difficult to sustain in Project Name year of Utilization Annual CO2
the current global oil market. It confirms that most of the existing CCU Operation Technology utilization (kt/ y)
projects with CO2-EOR end up in failure due to low profitability. • The
CO2-MET is a promising option of CO2 utilization to increase the CCU Yanchang Petroleum North 2013 CO2-EOR 50
investment value. In different scenarios, the ROIV of CO2-MET is about Shaanxi coal chemical 50000
1.6 times that of CO2-EOR at the same price growth rate. In addition, T/a CO2 capture and
demonstration
the implementation of the CO2-MET project is more flexible than that Research and demonstration of 2008 300
CO2-EOR
of the CO2-EOR project which is limited by the geographic location CO2-EOR in PetroChina Jilin
and geological storage potential. Oilfield
Sinopec Shengli Oilfield CO2- 2010 CO2-EOR 40
EOR project
Sinopec Zhongyuan Oilfield 2015 CO2-EOR 100
7. Limitations and future work
CO2-EOR project
Karamay Dunhua petroleum - 2015 CO2-EOR 50~100
The optimal investment value of the CO2-EOR project under the Xinjiang Oilfield CO2-EOR
medium technology learning scenario is about 20% lower than the results project
CO2-EOR project of Changqing 2017 CO2-EOR 50
from Lin and Tan at the same oil price [12]. The reason is that the capital
Oilfield
cost and O&M cost of the CO2-EOR technology are considered in the Daqing Oilfield CO2-EOR 2003 CO2-EOR 200
present study, which is lacking in the study of Lin and Tan [12]. In addition, demonstration project
the results that the ROIV is higher than the NPVIV shows that the deferred Sinopec East China oil and gas 2005 CO2-EOR 100

option can reveal the investment potential of the project through delaying field CCUS whole process
demonstration project
the investment decision, which is consistent with the conclusions obtained 2007 NA
Sinopec Qilu Petrochemical CO2-EOR
in the existing related studies [12,26,50 ]. CCS project
However, the model in the present study has some limitations: Only Qilu Petrochemical - Shengli 2022 CO2-EOR 1000
deferred options are currently considered, while there may be expansion Oilfield CCUS project

or contraction of investment in the CCU project. It is suggested such

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J. Liu et al.
Applied Energy 322 (2022) 119514

Table A2 Table A2 (continued )

The specific projects of CO2-MET [75]. Feedstocks
Company Start-up year Capacity
Company Start-up year Capacity Feedstocks (kt/y)
(kt/y) 3.6–72 COÿ and Hÿ from water
Thyssenkrupp/ technology
CRI 2011 4 Geothermal CO2 and H2 Uhde/Swiss Liquid providers electrolysis
from water electrolysis Future
Dalian Institute of 2020 1 CO2 and H2 from water Bse Engineering technology 8.2–16.4 COÿ and Hÿ from water

Chemical Physics electrolysis (PV) /BASF providers electrolysis

LiquidWind 2023 (plan for 6 45 Upcycled industrial Haldor Topsoe technology Variables COÿ and Hÿ from water

facilities by CO2 and H2 from water providers electrolysis

electrolysis Johnson Matthey technology Variable100- COÿ and Hÿ from water
2030) providers 1700 electrolysis
ABEL 2023 60 Biogenic CO2 and H2
from water electrolysis
Henan Shuncheng 2022 110 COÿ from limekiln and References
Group/CRI Hÿ from coke oven gas
Swiss Liquid Futures/ n/k 80 COÿ from ferrosilicon
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