Initial Risk Analysis and Decision Making Framework

Abstract

Commercialization of new carbon capture simulation initiative (CCSI) technology will include two key elements of risk management, namely, technical risk (will process and plant performance be effective, safe, and reliable) and enterprise risk (can project losses and costs be controlled within the constraints of market demand to maintain profitability and investor confidence). Both of these elements of risk are incorporated into the risk analysis subtask of Task 7. Thus far, this subtask has developed a prototype demonstration tool that quantifies risk based on the expected profitability of expenditures when retrofitting carbon capture technology on a stylized 650 MW pulverized coal electric power generator. The prototype is based on the selection of specific technical and financial factors believed to be important determinants of the expected profitability of carbon capture, subject to uncertainty. The uncertainty surrounding the technical performance and financial variables selected thus far is propagated in a model that calculates the expected profitability of investments in carbon capture and measures risk in terms of variability in expected net returns from these investments. Given the preliminary nature of the results of this prototype, additional work is required to expand the scope of the model to include additional risk factors, additional information on extant and proposed risk factors, the results of a qualitative risk factor elicitation process, and feedback from utilities and other interested parties involved in the carbon capture project. Additional information on proposed distributions of these risk factors will be integrated into a commercial implementation framework for the purpose of a comparative technology investment analysis.