Decision making under multi-dimensional price uncertainty for long lived energy investments
Aachen / E.ON Energy Research Center, RWTH Aachen University (2015) [Dissertation / PhD Thesis]
Page(s): 184 S. : graph. Darst.
The risks and uncertainty emanating from long-lived projects such as new large-scale power generation assets are a major challenge that investors face today in the energy business. Especially the market and policy risks arising from the priority dispatch of renewables and the price of carbon dioxide render such investments very risky and potentially unprofitable (stranded investments). Thus, cautious evaluation of the economic benefits is necessary before deciding about such far-reaching investments. In six distinct but related essays, different net present value and real options models have been developed that are especially suited for analyzing such long-lived investments. All models are based on multidimensional stochastic price path modeling, representing the basic underlying assets, such as the prices of electricity, carbon dioxide, and input fuels. Owing to the different risks associated with each of these assets, special attention is put on the risk-adjusted evaluation of the future cash flows. This also includes, besides time-, technology-, and state-dependency, correlations between cash flows of subsequent periods as well as reasonable extensions of an existing portfolio of power generation units.
von Nitzsch, Rüdiger