Valuation of Wind Energy Projects: A Real Options Approach
نویسنده
چکیده
We address the valuation of an operating wind farm and the nite-lived option to invest in it under di¤erent reward/support schemes. They range from a feed-in tari¤ to a premium on top of electricity market price, to a transitory subsidy. Availability of futures contracts on electricity with ever longer maturities allows to undertake market-based valuations. The model considers up to three sources of uncertainty, namely the future electricity price (which shows seasonality), the level of wind generation (which is intermittent in addition to seasonal), and the certi cate (ROC) price. Lacking analytical solutions we resort to a trinomial lattice (which supports mean reversion in prices) combined with Monte Carlo simulation at each of the nodes in the lattice. Our data set refers to the UK. The numerical results show the impact of a number of factors involved in the decision to invest: the subsidy per MWh generated, the initial lump-sum subsidy, the investment options maturity, and electricity price volatility. Di¤erent combinations of variables can help in bringing forward investments in wind generation. One-time policies, e.g. a transitory initial subsidy, seem to have a stronger e¤ect than a premium per MWh produced.
منابع مشابه
Computing optimal subsidies for Iranian renewable energy investments using real options
For the valuation of the renewable energy investments, providing private investors with a financial incentive to accelerate their investment is a very significant issue. Financial subsidies are known by the majority of the people to be one of the most important drivers in renewable energy expansion and one of the main reasons which result in the development of any industry. In this paper, we pr...
متن کاملMergers and market valuation: real options approach
This paper investigates the connection between market valuation anda type of the merger (stock, cash) using real options setup. I solveexplicitly for the timing and terms of cash mergers in two deferent settingsto demonstrate that cash mergers generally occur at low marketvaluations, whereas stock mergers that may be observed at both low andhigh valuations; the result holds with some dierences ...
متن کاملEconomic Appraisal of Solar Energy Projects under Uncertainty using a Fuzzy Real OptionApproach(Case Study: A 2MW Photovoltaic Plant in the South of Isfahan)
Investment in renewable energies especially solar energies encounters numerous uncertainties considering the increased dynamism in economic and financial conditions. It is thus important to use modern methods of economic appraisal for such investments. Our study provides a framework for use of the real option theory for economic appraisal of a 2MW photovoltaic plant in Isfahan province (as a ca...
متن کاملCombination of real options and game-theoretic approach in investment analysis
Investments in technology create a large amount of capital investments by major companies. Assessing such investment projects is identified as critical to the efficient assignment of resources. Viewing investment projects as real options, this paper expands a method for assessing technology investment decisions in the linkage existence of uncertainty and competition. It combines the game-theore...
متن کاملEconomic Appraisal of Investment Projects in Solar Energy under Uncertainty via Fuzzy Real Option Approach (Case Study: a 2-MW Photovoltaic Plant in South of Isfahan, Iran)
Investment in renewable energies especially solar energies is encountered with numerous uncertainties considering the increased dynamism in economic and financial conditions and makes investment in this field irreversible to a large extent, paying attention to modern methods of economic appraisal of such investments is highly important. A framework is provided in the current study in order to e...
متن کامل