Investment benefit analysis of coal-to-hydrogen coupled CCS technology in China based on real option approach

Abstract

As a zero-carbon energy, hydrogen energy is widey recognized as playing an important role in reducing carbon emissions and addressing climate change. Considering the resource and industrial conditions in China, the coal-to-hydrogen coupled with carbon capture and storage (CTHCCS) may be a necessary choice in the early stage of low-carbon hydrogen energy development. This study used real option models to analyze the investment benefits of the representative CTHCCS technology at the national and regional levels in the current and future development scenarios in China, and discusses the impact of uncertainties in carbon price, technological progress, and policy incentives on the CTHCCS investment. The results show that (1) The opportunity for immediate investment in the CTHCCS is not available in China unless the cost of carbon capture and storage (CCS) technology decreases and the carbon price increases significantly. (2) The current CTHCCS investment critical carbon price is 353.3 RMB/t, which will decrease by 45.0%, 73.9% and 57.3% when using the initial investment subsidy, carbon emission reduction subsidy and clean fuel subsidy, respectively. (3) The CTHCCS presents a relatively high investment benefit in Xinjiang, Inner Mongolia, and Shaanxi, highlighting that these areas are key pioneers for “blue hydrogen” production in China.