Real options and the value of generation capacity in the German electricity market

Jaroslava Hlouskova, Stephan Kossmeier, Michael Obersteiner and Alexander Schnabl

Review of Financial Economics, 2005, vol. 14, issue 3-4, 297-310

Abstract: In this paper we implement a real options model for the unit commitment problem of an electricity producing turbine in a liberalized market. The model accounts for various operating constraints of the turbine. Price uncertainty is captured by a mean reverting process with jumps and time‐varying means to account for seasonality. We demonstrate how the model can be used to value an electricity producing turbine, make profit‐maximizing commitment decisions and compute risk profiles of generating assets for risk management purposes.

Date: 2005
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https://doi.org/10.1016/j.rfe.2004.12.001

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Journal Article: Real options and the value of generation capacity in the German electricity market (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:14:y:2005:i:3-4:p:297-310

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