CO2 Pipeline Transport and Storage Network Cost Modelling and Multi-period Multi-scenario Stochastic Optimisation

Abstract

Carbon capture and storage stakeholders focusing on transport and storage aspects need to consider a wide range of risks and uncertainties when making investment decisions, including market, regulatory, geological and technical risks and uncertainties. This paper presents a stochastic optimisation based real options valuation framework that can be implemented to model CO2 pipeline transport and storage network costs in which uncertainties and engineering flexibilities are appraised, optimised and factored into the investment decisions, so that investors or regulators can confidently and quantitatively evaluate incentives that can support CCS deployment at large scale. The paper describes the models developed for this purpose and demonstrates the application of the modelling framework for a realistically designed CO2 storage cluster around Rotterdam in the Netherlands. It shown that the CCS network evolution is mainly driven by geological and regional geography constrains, CO2 supply rates, and the engineering designs relying on these. It has also been shown that individual storage sites have significantly different cash flows, dictated by their physical characteristics and the injection concept chosen. The storage capacity uncertainty and CO2 supply uncertainty (or CO2 mitigation target uncertainty) have been identified as the main uncertainties affecting a CCS network cluster.

Keywords: Carbon capture and storage network, multi-period, multi-scenario, stochastic optimisation