A real options-based framework for multi-generation liquid air energy storage investment decision under multiple uncertainties and policy incentives

Zhiying Zhang, Yu Chen, Xiaoyuan Chen and Huchang Liao

Energy, 2024, vol. 309, issue C

Abstract: Liquid Air Energy Storage (LAES) is a promising energy storage technology renowned for its advantages such as geographical flexibility and high energy density. Comprehensively assessing LAES investment value and timing remains challenging due to uncertainties in technology costs and market conditions. This study introduces a real options-based framework to evaluate investments in multi-generation LAES systems in China's power market by considering uncertain factors, such as investment cost and electricity price. Additionally, the impact of various incentives, including subsidies and preferential taxation policies, on LAES investment is investigated. The proposed investment decision framework is applied in a case study of a 10 MW-class multi-generation LAES system. Results show that the current economic environment is insufficient to trigger immediate LAES investment. The recommended optimal investment times are 2029 for Guangdong, 2031 for Jiangsu, and 2036 for Beijing and Qinghai without incentives. The levelized cost of storage at the optimal investment time is 0.105-0.174$/kWhe, and the optimal investment value is 882-9269k$. It is also found that preferential taxation policies can increase the LAES investment value. Increasing investment subsidies and technology learning effects have limited impacts on stimulating investments. In contrast, discharge subsidies are more favorable for promoting the deployment of LAES systems.

Keywords: Liquid air energy storage; Investment decision; Real options; Uncertainty; Policy incentive (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544224027993
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:309:y:2024:i:c:s0360544224027993

DOI: 10.1016/j.energy.2024.133025

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().