 Valuation and optimal operation of power investment projects with and without volume constraints under one-factor modelLingjie Shao, Junle Wu, Jinghan Ma, Shengjie Yu and Mengsi Li Energy, 2025, vol. 330, issue C Abstract: In the context of economic liberalization, privatization of energy production projects is increasingly commonplace. Nevertheless, this paper advances the research on optimal valuation and sales strategies for these projects during the operational phase by proposing a more comprehensive framework. This study employs a well-accepted one-factor model to formulate power spot prices and utilizes the dynamic programming principle to deduce the Hamilton–Jacobi–Bellman (HJB) equation that satisfies the valuation function, proving the existence and uniqueness of classical solutions to this equation. Subsequently, we verify through the verification theorem that the value function is the unique solution to the HJB equation and outline the expression that satisfies the optimal power sales strategy. Finally, the finite difference method is adopted to solve the HJB equation, considering both scenarios with and without volume constraints, and a sensitivity analysis is conducted by varying the marginal costs. Keywords: Power investment projects; One-factor model; Dynamic programming principle; HJB equation; Finite difference method (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:energy:v:330:y:2025:i:c:s0360544225022765 DOI: 10.1016/j.energy.2025.136634 Access Statistics for this article Energy is currently edited by Henrik Lund and Mark J. Kaiser More articles in Energy from Elsevier |
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