An approach for flexible design of infrastructure networks via a risk sharing contract: The case of CO2 transport infrastructure

Abstract

This paper presents a systematic design analysis method based on the flexible design approach and the concept of real options to support decision-makers during conceptual design of infrastructure public–private partnership projects under uncertainty. It employs probabilistic and simulation methods to model uncertainty and flexible design concept to generate flexible design strategies within the physical layout and the contractual structure. Monte Carlo simulation is used to compare the value effects of design strategies. Illustrated on a stylized public–private partnership to develop a carbon capture and storage infrastructure, it was found that partners could
find design solutions that not only reduce risk exposure but also enable value-creation. For example, by designing the physical network with flexibility options such as extra capacity and length coupled with flexible revenue guarantee contract, partners can be able to reduce risk and enhance their respective value in the face of capacity demand uncertainty. Such a design strategy can be a promising way to realize multi-user carbon capture and storage investments.