THREE-STEP SEQUENTIAL COMPOUND REAL OPTIONS METHOD FOR ELECTRICITY CAPACITY EXPANSION

A three-step sequential compound real options (SCRO) method is developed and applied to the South African technology for fluidised bed combustion with carbon capture storage (FBCwCCS). The objective of this paper address plan’s implementation when electricity demand uncertain. SCRO results are compared net present value (NPV) approach. data both SRCO NPV extracted from mixed integer two-stage stochastic programming results. Negative indicate that investment FBCwCCS should be rejected. suggest decision-makers can exercise option invest if start-up costs less than or equal R130 million, otherwise defer projects. industry lags behind in implementing models; same expected models.