Posted: June 17th, 2022
Determine the Value power plants under emission reduction regulations
Determine the Value power plants under emission reduction regulations
In this dissertation we model the value of a power generation asset during a real option approach. With electricity, emission and fuel allowances we express every required uncertainty on the energy market by an own stochastic process and derive an optimal clean spark spread. Classic operational constraints of a power plant are taken into account. Besides analyzing the behavior of the generation asset under different constraints, we want to determine the option to invest in new technologies to enhance these constraints. In this dissertation, we do not set up the standard American option with strike equal to the investment as usual, but set up an exchange option on two real options with different constraints. We indicate that this approach handles an option on new technology much more sensitive to the individual price uncertainties and considers all possible employments. If the intrinsic value of the exchange option exceeds the realization costs, it is time to invest. We also state an explicit Monte Carlo algorithm and current numerical results for the option to install a Storage unit and Carbon Capture.
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