 Applying real options analysis to assess cleaner energy development strategiesChing-Tsung Cheng, Shang-Lien Lo and Tyrone Lin () Energy Policy, 2011, vol. 39, issue 10, 5929-5938 Abstract: The energy industry, accounts for the largest portion of CO2 emissions, is facing the issue of compliance with the national clean energy policy. The methodology for evaluating the energy mix policy is crucial because of the characteristics of lead time embedded with the power generation facilities investment and the uncertainty of future electricity demand. In this paper, a modified binomial model based on sequential compound options, which may account for the lead time and uncertainty as a whole is established, and a numerical example on evaluating the optional strategies and the strategic value of the cleaner energy policy is also presented. It is found that the optimal decision at some nodes in the binomial tree is path dependent, which is different from the standard sequential compound option model with lead time or time lag concept. The proposed modified binomial sequential compound real options model can be generalized and extensively applied to solve the general decision problems that deal with the long lead time of many government policies as well as capital intensive investments. Keywords: Cleaner; energy; Lead; time; Compound; real; options (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:39:y:2011:i:10:p:5929-5938 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
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