Navigating Tariff Strategies: Optimizing Cashflow in CCS Projects

Abstract Objective This paper explores various methods of storage tariff charging mechanisms and their value impact for both project owners and emitters in CCS projects. It aims to highlight the pros and cons of each mechanism and provide guidance in selecting an appropriate charging mechanism that can suit different economic and commercial drivers. Method The study examines different methods of tariff charging mechanisms, some of which are inspired by loan types such as fixed-rate mortgages. Each tariff method is tested under different conditions to analyze the revenue balance for the project owner as well as the emitters. Various datasets are used to assess the impact of different tariff mechanisms on project sizes with varying unit costs, payment timing, and susceptibility to project risks by measuring cash flow impacts under adverse conditions. Results There is no ‘one size fits all’ solution for selecting the best tariff charging mechanism. Different circumstances necessitate different methods. As the interests of emitters and storage owners sometimes conflict, a mechanism that can give a fair return to project owners at a competitive cost to emitters is a delicate balancing act. Project execution phasing and timing of cash outflows significantly impact cash flow and should be considered when determining the tariff mechanism. Additionally, project risks, uncertainties, and liabilities must be evaluated, as different mechanisms respond differently to a given situation. The paper discusses various methods and emphasizes the need for comparison and evaluation for each project. Given the nascent and immature market for CCS, the right policy support is essential to make these projects viable. Novel Information CCS projects are inherently expensive, risky, and often commercially challenging. This paper provides insights into tariff mechanisms that can benefit all parties involved, fostering mutual understanding and cooperation to ensure project success.