Unlocking CCUS-Ready Coal Power Investments: A Spatial Real Options Approach

Abstract

New coal-fired capacity may still be needed in some economies to support energy security, yet tightening carbon constraints increasingly threaten its long-term investment viability. Designing new plants to be Carbon Capture, Utilization and Storage (CCUS)-ready is therefore critical, but existing investment studies largely neglect the spatial factors that shape CCUS investment viability. In this study, we propose a Spatial Real Options (SRO) framework that couples national-scale siting screening with site-level real-options valuation. A national inventory of technically feasible sites across China (n = 194,027) is linked to a real-options model that incorporates temporal uncertainty together with province-specific conditions, CO2 transport distance, and alternative policy instruments. Results show that the nationwide investable window for conventional coal closes by the early-to-mid 2040s. CCUS integration materially reshapes project economics, but outcomes differ substantially across storage options and transport distances: oil-reservoir storage remains economically attractive at short distances, whereas saline-aquifer storage requires operational incentives to become competitive. Generation-hour compensation substantially outperforms investment-cost subsidies, indicating that operating costs, rather than upfront capital, constitute the binding constraint. The resulting spatiotemporal maps provide a practical decision-support tool for identifying where and when CCUS-ready coal investments are most attractive under progressive decarbonization.