A decision-making tool for project investments based on real options: the case of wind power generation

Muñoz, José I.; Contreras, Javier; Caamaño, Javier; Correia, Pedro Pezarat

doi:10.1007/s10479-011-0856-9

Cited by 48 publications

(23 citation statements)

References 20 publications

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“…Die jüngste Literatur empfiehlt jedoch auch die Verwendung der Realoptionsanalyse als Bewertungsmodell für EEP (Lee und Shih 2010;Fernandes et al 2011;Muñoz et al 2011;Martínez-Cesena und Mutale 2011;Santos et al 2014). Im Unterschied zur Kapitalwertmethode ist die Realoptionsanalyse in der Lage, die Interaktion der wichtigsten Einflussfaktoren -Unsicherheit der Zahlungsströme, Management-Flexibilität und Irreversibilität der Investitionskosten -eines Projektes zu berücksichtigen.…”

Section: Introductionunclassified

Bewertungsmethoden in der Projektfinanzierung Erneuerbarer Energien

Bannier

2016

Schmalenbachs Z betriebswirtsch Forsch

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Zusammenfassung Diese Studie vergleicht die etablierte Kapitalwertmethode mit der neueren Realoptionsanalyse zur Bewertung von Investitionsprojekten im Bereich Erneuerbarer Energien. Anhand eines fiktiven Windparkprojektes wird gezeigt, in welchem Umfang die Realoptionsanalyse in der Lage ist, den Wert aktiver Managemententscheidungen im Verlauf der Projektdurchführung (Fortführungsoption) zu quantifizieren. Es werden die Stärken und Schwächen beider Verfahren herausgearbeitet und gezeigt, dass insbesondere die Kombination aus Management-Flexibilität und politischen Unwägbarkeiten im Bereich Erneuerbarer Energien Vorteile zur Anwendung der Realoptionsanalyse darstellen. Fehlen im jeweiligen Sektor jedoch verlässliche Marktwerte, wird die Aussagekraft der Optionsprämie abhängig von der Güte der somit notwendigen Approximationen durch den individuellen Anwender.Schlüsselwörter Kapitalwertmethode · Realoptionsanalyse · Erneuerbare Energien · Windkraft · Windpark · Fortführungsoption JEL-Classification G32 · Q42 Abstract This study compares the traditional discounted cashflow approach with the newer real options approach for evaluating investments in renewable energy projects. Using the fictitious example of an onshore wind farm, the analysis illustrates in which way the real options method is suitable for quantifying the value of active management decisions in the project sequencing process. The analysis hence focuses K 76 Schmalenbachs Z betriebswirtsch Forsch (2016) 68:75-110 on the sequencing option. The strengths and weaknesses of both the real options method and the discounted cashflow approach are examined in depth. It is the unique combination of management flexibility and political uncertainty surrounding the sector of renewable energy that renders the real options analysis particularly attractive. The potential lack of reliable market assessments of asset values in this sector, however, reduce the validity of the real option approach. The real option premium then becomes a function of the consequent individual approximations made in the evaluation process.

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Section: Introductionunclassified

Bewertungsmethoden in der Projektfinanzierung Erneuerbarer Energien

Bannier

2016

Schmalenbachs Z betriebswirtsch Forsch

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“…Liu and Nagurney (2011) consider supply chain outsourcing under exchange rate risk and competition when decision makers have different risk attitudes. Recently, the real options approach has also been applied in several investment decision analyses, such as a power generation project (Munoz et al 2011), mobile telecommunications networks (Franklin 2015), and carbon capture and sequestration technology (Heydari et al 2012). More examples of real options application can be found in, for example, Amram and Kulatilaka (1999) and Dixit and Pindyck (1994).…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

Real options approach for fashionable and perishable products using stock loan with regime switching

Chiu¹,

Hou

et al. 2015

Ann Oper Res

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We use the real options approach to study the discount price and the optimal call-back time of a recallable air ticket, and the optimal launch time for a fashion product. Two types of uncertainty are considered, the demand uncertainty and the uncertainty of the switch time of the market condition. We propose that the problems can be formulated as a financial stock loan with regime switching and finite maturity. We formulate the stock loan as an American call options with a time-varying strike price. First, we derive the approximate valuation of the stock loan. Then, we formulate the recallable air ticket problem and the launch time of fashion product problem as two different stock loans. The analyses show that a higher (exogenous) regime-switching rate leads to a higher value for the call option, while a lower (exogenous or endogenous) increment rate on the exercise price allows the company to wait longer before exercising the option and thereby obtain a bigger profit. Thus, by obtaining more accurate information, or having better control of these parameters, could help companies to improve their risk management.

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“…Under uncertainty, investment decisions can significantly benefit if real option strategies were adopted (Chrisiansen and Wallace 1998;Munoz et al 2011). In this work, we utilize real option theory to model microgrid investment taking into account several sources of uncertainty.…”

Section: Introductionmentioning

confidence: 99%

Microgrid investment under uncertainty: a real option approach using closed form contingent analysis

Farzan¹,

Mahani

Gharieh

et al. 2015

Ann Oper Res

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The traditional net present value approach to investment in microgrid assets does not take into account the inherent uncertainties in fuel prices, cost of technology, and microgrid load profile. We propose a real option approach to microgrid investment, which includes solar photovoltaic (PV) and gas-fired generation assets. Likewise the (n, m) exchange literature in real option analysis, we examine cases with interdependency and independency of fuel price and the cost of PV technology. This work, however, makes a major contribution by the way of introducing a new parameter, which is defined as the elasticity of the option value to prices and is used in the formulation of closed form solutions. We further extend the (1, 1) exchange problem here to include operational flexibility of microgrid, such that optimal switching between investment, suspension and re-activation can be examined.

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A decision-making tool for project investments based on real options: the case of wind power generation

Cited by 48 publications

References 20 publications

Bewertungsmethoden in der Projektfinanzierung Erneuerbarer Energien

Bewertungsmethoden in der Projektfinanzierung Erneuerbarer Energien

Real options approach for fashionable and perishable products using stock loan with regime switching

Microgrid investment under uncertainty: a real option approach using closed form contingent analysis

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