Decisions on investments in photovoltaics and carbon capture and storage: A comparison between two different greenhouse gas control strategies

• We compare CCS and PV as CO2 reduction strategies and focus on merit-order effects.
• CCS has higher marginal cost than PV, but CCS does not need backup capacities.
• Merit-order effects influence the profitability of investments in CCS and PV.
• CCS investments at moderate rates tend to be more beneficial than investments in PV.
• However, legal restrictions and lack of acceptance constitute limiting factors.

Decisions of electricity suppliers on investments in low-carbon energy technologies like PV (photovoltaics) and CCS (carbon capture and storage) depend on the expected profits or surpluses that can be earned. For an assessment of the profitability of investments in PV (and other renewable energy technologies), additional costs caused by the fluctuation in PV power plants' productivity and by the need for backup capacities have to be taken into account. Changes in the rest of the power plant stock will via their influence on the merit-order curve also affect the return on investment. Bearing these aspects in mind, it might become more attractive to invest in alternative technologies like CCS than to channel the investments towards PV in combination with backup power plants. In our study we compare investments in CCS and PV regarding possible merit-order effects and profitability, using investments in Germany as an example.