The Carbon Market Incremental Payoff in Renewable Electricity Generation Projects in Brazil: A Real Options Approach

Batista, F.R.S.; Melo, A.C.G.; Teixeira, José A. Carvalho; Baidya, Tara Keshar Nanda

doi:10.1109/tpwrs.2010.2102051

Cited by 11 publications

(9 citation statements)

References 9 publications

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“…According to the no arbitrage principle, equation 18can be derived. ϕ = r dt (18) Equation (19) can be obtained by solving the simultaneous equations (12), (17) and (18).…”

Section: B Athematical Modeling Of Optimal Investment Timing Based Omentioning

confidence: 99%

“…Literature [17] applies real options to the carbon market to estimate the large incremental return of grid-connected renewable energy in the carbon market, namely the approved emission reduction-CER. The writing background of his thesis is based on whether the registration of clean development mechanism in Brazil has the value of investment.…”

Section: Introductionmentioning

confidence: 99%

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The Optimal Investment Strategy of P2G Based on Real Option Theory

2020

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This paper initially proposes a real options model for the investment of the Power-togas (P2G) plant based on uncertain operating cost which mainly refers to the price of electricity. Through the analysis of the uncertainty parameters affecting the operation of the P2G project, the mathematical model expressing the relations between the parameters of P2G operation cost, electricity price, sunk cost, and other parameters are established. The Brownian motion is utilized to describe the operation cost, based on which, the option value and the project value models of P2G are derived in detail. According to these two models, the optimal investment timing of the P2G device and the corresponding optimal investment capacity can be determined. The above models are verified by numerical simulation. In addition, the influence of the change of parameters on the investment timing and investment capacity in the real options model is studied. The results show that the volatility of electricity price has a greater impact on the option value of P2G project than that of other parameters. When there is a high operating cost uncertainty, waiting is a better option, and the investment can be performed when the operating cost falls to the cost with reference to the optimal investment timing. INDEX TERMS Power-togas , real option, investment opportunity, investment capacity, operation cost uncertainty.

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“…According to the no arbitrage principle, equation 18can be derived. ϕ = r dt (18) Equation (19) can be obtained by solving the simultaneous equations (12), (17) and (18).…”

Section: B Athematical Modeling Of Optimal Investment Timing Based Omentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Optimal Investment Strategy of P2G Based on Real Option Theory

2020

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“…It has been proven that the solutions found using a real options approach coincide exactly with those of dynamic optimization at least in the cases where myopic decisions are optimal (Gahungu & Smeers, 2011). There have been some applications of real options to power systems, in particular in GEP (Batista, Geber de Melo, Teixeira, & Baidya, 2011;Bunn & Larsen, 1994;Gahungu & Smeers, 2011). Some authors have also studied some specific aspects of transmission investments using this technique, such as the optionality embedded in single lines (Saphores, Gravel, & Bernard, 2004) or in selecting the size of interconnections (Fleten, Heggedal, & Siddiqui, 2011) or the potential of distributed generation or FACTS for deferring investment in transmission lines (Blanco, Olsina, Garces, & Rehtanz, 2011;Vasquez & Olsina, 2007).…”

Section: Real Options and The Value Of Waiting To Investmentioning

confidence: 99%

Real options valuation applied to transmission expansion planning

Lumbreras

Bunn

Ramos

et al. 2016

Quantitative Finance

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Transmission Expansion Planning (TEP) is a complex problem where building a new line involves a long permitting process of around 10 years. Therefore, transmission expansion must anticipate the evolution of uncertainties particularly those derived f by changes in the capacity and location of new generating facilities. As it is not possible to request permits for all possible lines, priorities must be established. We develop a formulation to use Real Options Valuation (ROV) to evaluate the potential benefit of candidate lines and thereby identify priority projects. We present a feasible representation of optionality in TEP projects and propose a tractable evaluation of option value. The proposed technique identifies the candidate transmission lines with the highest potential, as well as their main value drivers. This is implemented on a realistic case study based on the Spanish system.

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“…Renewable energy, on the other hand, also draws much attention as an effective approach to limit the emission of power generation. In [5] and [6], a methodology is proposed to estimate the payoff with renewable energy sources to access power systems.…”

Section: Introductionmentioning

confidence: 99%

Economic dispatch model considering policy-guided carbon trading mechanisms

Song¹,

Liu

2013

2013 IEEE Grenoble Conference

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Climate change has become one of the most serious problems nowadays. Electric power industry, as a major emitter of greenhouse gas CO 2 , has been demanded to develop in an environmental friendly way. This paper presents economic dispatch model considering carbon reduction policies, as well as basic data analysis to determine the impact of policy-guided carbon emission reduction strategies on power system operation and dispatch. Carbon reduction mechanisms are simulated and discussed in different case studies. By analyzing the effect of different carbon reduction policies, this model can be used to help regulators with decision making and system operators with economical and environmental operation.Index Terms -Carbon emission, carbon trading, economic dispatch, energy policy, power system operation, optimal power flow.

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The Carbon Market Incremental Payoff in Renewable Electricity Generation Projects in Brazil: A Real Options Approach

Cited by 11 publications

References 9 publications

The Optimal Investment Strategy of P2G Based on Real Option Theory

The Optimal Investment Strategy of P2G Based on Real Option Theory

Real options valuation applied to transmission expansion planning

Economic dispatch model considering policy-guided carbon trading mechanisms

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