The Application of Real Option to Renewable Energy Investment: A Review

Liu, Liyun; Zhang, Mingming; Zhao, Zhenzhi

doi:10.1016/j.egypro.2019.01.921

Cited by 31 publications

(11 citation statements)

References 25 publications

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“…In [15] the application of this method is analyzed to assess decision-making in electricity markets; also, in [16] this method is used evaluate investments in renewable energy sources in emerging countries, which present economic uncertainty regarding the costs of technologies and government policies. The authors in [17] conducted a literature review on the real time options method for investments in NCRES and proposed the use of vertical and horizontal analysis as a complement.…”

Section: Methodologies To Evaluate Costs and Investments In Ncresmentioning

confidence: 99%

Levelized Cost of Electricity in Colombia under New Fiscal Incentives

Saldarriaga-Loaiza¹,

López-Lezama²,

Villada³

2020

International Journal of Engineering Research and Technology

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The full use of economic incentives becomes a complex process for investors, which reduce interest in the construction of electricity generation projects using Non-Conventional Renewable Energy Sources (NCRES). Thereby, it is necessary to establish investment methodologies that allow defining the most appropriate generation technologies with competitive costs. Therefore, an adjusted methodology of Levelized Cost of Electricity (LCOE) is proposed in this article to evaluate the potential effects of the current economic incentives on the generation costs of NCRES. It will serve as a tool to assess technical and financial viability of projects from different renewable energy sources (solar, biomass and wind), as well as define different investment strategies in order to take full advantage of current economic incentives. Finally, three solar photovoltaic plants were analyzed under seven investment scenarios, achieving a LCOE between 8.4 ¢USD/kWh and 32.3 ¢USD/kWh.

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Section: Methodologies To Evaluate Costs and Investments In Ncresmentioning

confidence: 99%

Levelized Cost of Electricity in Colombia under New Fiscal Incentives

Saldarriaga-Loaiza¹,

López-Lezama²,

Villada³

2020

International Journal of Engineering Research and Technology

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“…The literature on real options approach has been reviewed by several authors such as [8,14,25]. None of the authors included utilization in their model.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of Plant Utilization on Irreversible Investment Under Uncertainty with Application to Refinery Investment

Omosigho

Enoyoze

Ekhosuehi³

2021

Cro. Oper. Res. Rev.

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Why are some regions preferred when investors consider irreversible investment? This study offers an explanation to this question and suggests improvements that will assist disadvantaged regions improve on their bid for funds. The paper considers irreversible investment under uncertainty when installed capacity utilization is incorporated. We develop a normative model for irreversible investment problem under uncertainty using real options approach. Capacity utilization was not a major consideration by previous authors who assumed that installed capacity would be fully utilized. Variations in capacity utilization may be attributed to disruption in input supply or infrastructural bottlenecks that limit firms to get their products to customers. This study modifies the geometric Brownian motion for the value of a project to account for capacity utilization in the derivation of irreversible investment decision rule. The proposed model provides a theoretical explanation of how utilization affects irreversible investment decisions. Data on petroleum refinery margins is used to illustrate application of the proposed model to refinery investment. The study reveals that capacity utilization has an inverse effect on the investment trigger, and so, links irreversible investment decisions to plant utilization. We recommend optimal utilization of installed plant capacity for regions seeking funds for irreversible investment.

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“…De acuerdo con Brach (2003), la evaluación tradicional asume flujos rígidos en la vida de un proyecto e ignora los riesgos y la flexibilidad que tiene la gerencia para reaccionar a las diferentes situaciones/ incertidumbres que se puedan presentar. Adicionalmente, para el caso de las energías renovables, muchos estudios destacan la importancia de analizar el impacto de las políticas que promueven el uso de este tipo de energías y las regulaciones ambientales (Liu et al, 2019).…”

Section: Marco Teóricounclassified

Análisis de opciones reales para la valoración financiera de proyectos de energía geotérmica en Colombia

2021

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Los proyectos de inversión en energía frecuentemente son evaluados mediante la aplicación de técnicas clásicas que asumen un panorama estático en los flujos de caja, resultando insuficientes al no considerar los riesgos asociados a las variables de entrada ni la flexibilidad de los inversionistas para la toma de decisiones. El objetivo principal de esta investigación fue evaluar la viabilidad financiera de proyectos de energía geotérmica en Colombia, considerando la incertidumbre y el riesgo característico de este tipo de proyectos. Primero, se describió el caso de estudio analizado, las variables de modelación más comunes en proyectos de esta índole y las distribuciones probabilísticas asociadas. Posteriormente se utilizó la simulación de Monte Carlo para conocer la viabilidad financiera del proyecto mediante la aplicación de criterios clásicos de la literatura. Estos hallazgos fueron comparados con los obtenidos al aplicar el enfoque de opciones reales al caso de estudio, el cual fue evaluado a partir de una opción real compuesta durante las fases de inversión. Los resultados obtenidos evidenciaron que mediante el uso de los métodos tradicionales el proyecto fue clasificado como no factible, pero, al considerar la flexibilidad de los inversionistas, este resultó atractivo. Por tanto, al momento de evaluar la viabilidad financiera de un proyecto de inversión se deben considerar factores de riesgo e incertidumbre, los cuales agregan valor al análisis de factibilidad y presentan una visión más cercana a la realidad de los proyectos.

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The Application of Real Option to Renewable Energy Investment: A Review

Cited by 31 publications

References 25 publications

Levelized Cost of Electricity in Colombia under New Fiscal Incentives

Levelized Cost of Electricity in Colombia under New Fiscal Incentives

Impact of Plant Utilization on Irreversible Investment Under Uncertainty with Application to Refinery Investment

Análisis de opciones reales para la valoración financiera de proyectos de energía geotérmica en Colombia

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