On the evaluation of infrastructure investments: the case of electricity generation

Per-Olov Johansson (), Bengt Kriström () and Kaj Nyström ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: We derive general equilibrium cost-benefit rules for investment in a small power plant that needs (or does not need) carbon emission permits for production. Both atemporal and intertemporal models are considered, the latter showing e. g. that there exists a kind of option value also under certainty. Finally we introduce uncertainty by briefly discussing the concepts of quasi-option and option values and a switching possibility that is available for flexible power plants like hydropower ones which can easily be turned on and turned off.

Keywords: Cost-benefit analysis; externalities; switching models (search for similar items in EconPapers)
JEL-codes: C61 H21 Q40 (search for similar items in EconPapers)
Date: 2009-10-07
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