Renewable energy investments under different support schemes: A real options approach

Boomsma, Trine Krogh; Meade, Nigel; Fleten, Stein–Erik

doi:10.1016/j.ejor.2012.01.017

Cited by 330 publications

(231 citation statements)

References 39 publications

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“…Using the law of iterated expectations and the strong Markov property of the GBM, which states that price values after time τ are independent of the values before τ and depend only on the value of the process at τ , we can rewrite (7) as in (8). The stochastic discount factor E P e −ρτ = P P β (Dixit and Pindyck [13], p.315), where β > 1 is the positive root of…”

Section: Fig 1 Lumpy Investmentmentioning

confidence: 99%

“…Huisman and Kort [22] introduce game-theoretic considerations and show how, in a duopolistic competition, a leader can use discretion over capacity strategically in order to deter a follower's entry temporarily. A policy-oriented model for investment and capacity sizing is presented by Boomsma et al [8], who analyse the impact of uncertainty stemming from different types of policy mechanisms on investment and capacity sizing decisions. The impact of risk aversion on such decisions when a firm has operational flexibility is addressed in Chronopoulos et al [11], who find that higher risk aversion facilitates investment by decreasing the optimal capacity of a project.…”

Section: Introductionmentioning

confidence: 99%

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Stepwise Investment and Capacity Sizing Under Uncertainty

2015

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The relationship between uncertainty and managerial flexibility is particularly crucial in addressing capital projects. We consider a firm that can invest in a project in either a single (lumpy investment) or multiple stages (stepwise investment) under price uncertainty and has discretion over not only the time of investment but also the size of the project. We confirm that, if the capacity of a project is fixed and the investment premium associated with stepwise investment is positive, then lumpy investment becomes more valuable than a stepwise investment strategy under high price uncertainty. By contrast, if a firm has discretion over capacity, then we show that the stepwise investment strategy always dominates that of lumpy investment. In addition, we show that the total amount of installed capacity under a stepwise investment strategy is always greater than that under lumpy investment.

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Section: Fig 1 Lumpy Investmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Stepwise Investment and Capacity Sizing Under Uncertainty

2015

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“…The need for such instruments was due to high cost of renewable technology [47], and to be able to shift electricity generation on a more sustainable track [48]. These instruments comprised of two quite similar entities, namely, Tradable Green Certificates (TGC) [49,50] and Zero-Emission Certificate (ZEC) [51], along with the FiT scheme [35], and a general investment incentive scheme by Alishahi et al [52].…”

Section: Financial Instrument Modelsmentioning

confidence: 99%

Application of system dynamics approach in electricity sector modelling: A review

Ahmad

Tahar

Muhammad‐Sukki

et al. 2016

Renewable and Sustainable Energy Reviews

105

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“…While there have been lots of literature produced on RE, much of the focus has been on analyzing different support scheme available to support regulators' RE initiative (see for example [10]- [12]). The review shows FiT system has been among the popular choice among the scholars.…”

Section: Drivers Affecting Investment Decision In Rementioning

confidence: 99%

Renewable Energy Investment in Malaysia: An Integrated Model in Evaluating Public Decision Making Process

Husin¹,

Alrazi²

2017

JOCET

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Abstract-Rapid depletion of fossil fuel reserves as well as climate change has driven the world including Malaysia towards renewable energy (RE) sources which are untapped and environmentally friendly. Through a feed-in-tariff system, Malaysia has set a target of increasing its RE capacity to 11 % of total capacity mix of electricity generation by year 2020. The system is supported with five strategic thrusts (ST) of National RE policy which include providing a conducive business environment for RE (ST2). Despite the existence of ST2, to the knowledge of this research, there has been no effort being made to better understand the variety of decisions taken by Malaysian RE investors to invest in RE. Through a review of RE literature, this study develops an integrated decision making model, to be tested on Malaysian RE investors, by using Theory of Planned Behavior as the underlying framework. The theory is then modified to incorporate previous drivers introduced in previous RE literature that largely based on behavioral finance and institutional theory. Given that RE in Malaysia is currently reported at only at 1 % of total capacity mix as compared to the 11 % target, the model will help Malaysian regulators to better leverage all drivers that stimulate RE investment and design a more conducive business environment for RE.

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Renewable energy investments under different support schemes: A real options approach

Cited by 330 publications

References 39 publications

Stepwise Investment and Capacity Sizing Under Uncertainty

Stepwise Investment and Capacity Sizing Under Uncertainty

Application of system dynamics approach in electricity sector modelling: A review

Renewable Energy Investment in Malaysia: An Integrated Model in Evaluating Public Decision Making Process

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