Investment decisions on carbon capture utilization and storage retrofit of Chinese coal-fired power plants based on real option and source-sink matching models

Carbon Capture Utilization and Storage (CCUS) is the only technological option for decarbonizing existing coal-fired power plants (CFPPs) deeply, yet its current scale is far from the level required to meet global climate goals. How carbon price can facilitate CCUS decarbonization of CFPPs in China is a great concern. This study couples a CCUS source-sink matching optimization model covering onshore and offshore geological storages with a trinomial-tree real options model, by which the Chinese critical carbon prices for CCUS investment at different emission reduction potentials are quantified. The results show that when the carbon price reaches 100, 200, and 400 CNY/t, then 24, 28, and 314 GW of CFPPs will enable to invest in CCUS immediately, achieving cumulative 1.8, 2.1, and 24.3 GtCO2 emission reductions over their remaining lifetime. To meet the global warming 2 °C target constraint on China's power sector, the carbon price need to reach 370 CNY/t. •CCUS source-sink matching model combined with real option method is developed.•Plant-level investment decisions for CCUS retrofitted coal-fired power are obtained.•Critical carbon prices for near 50% plants range from 300 to 500 CNY/t in China.•Incentive polices can lower critical carbon prices of CCUS retrofit at varying levels.•Offshore storage is critical for low-cost CCUS retrofit in southeast coastal China.