Evaluation of new and renewable energy technologies in Korea using real options

Abstract

SUMMARY For several years recently, the price of oil has fluctuated due to the weak US dollar and financial risks. In particular, the WTI crude oil price reached $147 per barrel in July of 2008, which is the highest price thus far. An awareness of an impending crisis and concern over climate change are driving an increase in R&D for alternative energy sources instead of fossil‐based energy. However, the researches based on traditional method show negative options about the economic value of new and renewable energy. This paper evaluates the value of new and renewable energy through a real option method which considers the uncertainty associated with fossil energy and the uncertainty of the success of R&D. The evaluating model assumes that the fossil energy price follows a geometric mean reverting process and that the probability of success with R&D on renewal forms of energy follows a binomial probability model. The model considers four options: the option to continue R&D, the option to delay R&D, the option to deploy R&D, and the option to abandon R&D. Finally, the value of Korean R&D on renewal forms of energy is analyzed by the model. Copyright © 2012 John Wiley & Sons, Ltd.

Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case

“…So far, studies that have used the real option approach to assess the economic value of renewable energy have mainly considered the uncertainty of fossil energy prices [12][13][14][15][16][17][18][19], because renewable energy and fossil energy can be regarded as substitute goods. Davis & Owens [12] estimated the value of renewable energy generation technologies using a continuous real option model considering the price uncertainty of fossil fuels.…”

Setting a fostered energy network by decarbonizing the grid: H ybridization, control, and future solutions upon storage

“…The concept of Microgrid violates whenever the implemented hybrid system will not be able to cope with the availability of sources used for power generation. Various countries like Korea and the United States are also working for development of RE sources as there is a huge hike on crude oil price, and this leads to work them with R&Ds to explore the real option for degradation of fossil fuels . A simple algorithm has been developed in order to determine the total number of generating units of wind turbine generators (WTG), photovoltaic array, and the storage associated with the autonomous hybrid Microgrid .…”

“…Various countries like Korea and the United States are also working for development of RE sources as there is a huge hike on crude oil price, and this leads to work them with R&Ds to explore the real option for degradation of fossil fuels. 8 A simple algorithm has been developed in order to determine the total number of generating units of wind turbine generators (WTG), photovoltaic array, and the storage associated with the autonomous hybrid Microgrid. 9 If the system consists of solar PV-wind, energy-fuel cell, or some other renewable sources, it can be split as solar PV-wind energy-based system, wind energy-fuel cell technology-based system, or solar PV-fuel cell technology-based system depending upon the availability of the resources.…”

Economic analysis of renewable heat and electricity production by sewage sludge digestion-a case study

“…These studies have not been LCA based. Consciousness over the environmental crisis raises the level of the R&D for alternative energy sources instead of the fossil fuel [15]. It has referred to the results of Merlin's and Solagro studies without presenting an expanded analysis.…”

“…indirect cost) [14]. Consciousness over the environmental crisis raises the level of the R&D for alternative energy sources instead of the fossil fuel [15]. Hence, this project sets high environmental objectives including (i) sustainable sewage sludge management, (ii) production of renewable energy and (iii) energy independency of the WWTP.…”