Valuation of operational flexibility: A case study of Bonneville power administration

Yong Chen, Nathan Gibson, Arpan Biswas, An Li, Hamid Bashiri, Erfaneh Sharifi, Claudio Fuentes, Christopher Hoyle, Arturo S. Leon and Christopher J. Skypeck

Energy Economics, 2021, vol. 98, issue C

Abstract: Real options theory is applied to quantify the value of operational flexibility intrinsic to the hydropower generation capacity from the perspective of US federal power marketing administrations. The option value in this model arises from the tension between the increase in current sales revenue and the increase in the exposure of future power shortages. Using Bonneville Power Administration as an example, we apply the proposed valuation framework, analyze the optimal management policy for Bonneville Power Administration and investigate the potential impacts of Wind Vision 2050.

Keywords: Flexibility; Real option; Hydropower; Power market administration; Balancing authorities (search for similar items in EconPapers)
JEL-codes: Q4 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001560

DOI: 10.1016/j.eneco.2021.105251

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