Financial valuation of investments in future power generation technologies: nuclear fusion and CCS in an emissions trading system

Heinz Klingelhöfer () and Peter Kurz ()

Central European Journal of Operations Research, 2011, vol. 19, issue 4, 415-438

Abstract: This paper outlines a model approach for the financial valuation of future power generation technologies, such as nuclear fusion or carbon capture and storage (CCS) under an emissions trading regime. Since on imperfect markets, interdependencies between decisions inhibit the isolated valuation of an investment, we use simultaneous calculation of optimal production, sales and investment programs; these are subject to the constraints and conditions characteristic for investments in low- and zero-carbon technologies such as fusion and CCS. Duality theory allows to derive, identify and economically interpret the determinants for the price ceiling as (corrected) net present values. Sensitivity analysis shows how changes in the technical specification or environmental policies affect the maximum payable price. Particularly, tradable permits have several effects on low-carbon investments and do not always encourage CO 2 abatement. While a zero-emissions technology like fusion always profits from a tightened emissions trading scheme, for low-carbon technology like CCS—in particular cases—this may even be counterproductive from an economic as well as an environmental point of view. Copyright Springer-Verlag 2011

Keywords: Energy; Emissions trading; Fusion; Carbon capture and storage; Investment analysis (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1007/s10100-011-0193-8

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