Switch and defer option in renewable energy projects: Evidences from Brazil

Nunes, Luis Eduardo; Lima, Marcus Vinícius Andrade de; Davison, Matt; Leite, André Luís da Silva

doi:10.1016/j.energy.2021.120972

Cited by 19 publications

(7 citation statements)

References 34 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…La Evaluación de proyecto o la inversión de generación de energía renovable, principalmente eólica y solar, incluye investigaciones dirigidas a evaluar de manera óptima las inversiones desde la perspectiva de la generación de energía o la viabilidad financiera y económica de los proyectos para la producción de energía renovable. Con este propósito están los estudios realizados por Ofori et al (2021), quienes aplicaron árboles binomiales y simulación Monte Carlo, evaluando como incertidumbres los factores económicos y factores tecnológicos, contemplaron la opción de retrasar; Nunes et al (2021), aplicaron el valor presente neto modificado y analizaron la opción de esperar; Assereto y Byrne (2021), usaron Monte Carlo de mínimo cuadrado, evaluando el precio de la electricidad como incertidumbre y valoraron la opción de retrasar.…”

Section: Discussionunclassified

Real Options and their application in renewable energy projects. State-of-the-art review

2023

View full text Add to dashboard Cite

The use of renewable energy sources, such as wind, solar, among others, has been growing, especially in recent years. The main objective of this study was to conduct a literature review on the real options approach for assessing the feasibility of investing in energy production and its derivatives. Thirty publications on the mentioned topic were analyzed using the Mendeley Reference Manager bibliographic software and categorized into seven groups according to their purpose: 1) Evaluation of renewable energy projects or investments, 2) Evaluation of non-renewable energy projects or investments, 3) Evaluation of energy auctions, portfolios, and investments in the energy market, 4) Evaluation of renewable energy technologies, 5) Evaluation of the impact of regulatory policies on renewable energy projects, 6) Evaluation of the transition to renewable energy generation, and 7) Evaluation of the design, size, and location of wind farms. Nine types of options were identified: 1) Waiting, 2) Delaying, 3) Anticipating, 4) Expanding, 5) Exercising, 6) Rejecting, 7) Abandoning, 8) Expanding, and 9) Switching. Additionally, the techniques and models applied to evaluate the options and simulate the twenty-nine uncertainties, grouped into eight categories, considered in the research were examined. In the future, there is a need to increase studies using the real options approach to evaluate renewable energy projects under uncertainties, applying new evaluation techniques that allow for the valuation and establishment of flexible strategies.

show abstract

Section: Discussionunclassified

Real Options and their application in renewable energy projects. State-of-the-art review

2023

View full text Add to dashboard Cite

show abstract

“…Deferral provided forest managers with a less risk for waiting and obtaining more information before investing the capital (Nunes et al, 2021). By presenting unconventional cash flow, investment projects of planted forests of Pinus spp., with revenue only in the year of thinning and clear cutting, the deferral promotes greater security in decision making for forest managers, when planning the optimal time to invest.…”

Section: Discussionmentioning

confidence: 99%

Real options analysis applied to investment projects in planted forests of Pinus

et al. 2022

View full text Add to dashboard Cite

Planted forests are long-term projects involving a large monetary contribution, and generally require the incorporation of managerial flexibility. As the traditional methodology for economic evaluation does not allow for the incorporation of these flexibilities, our study aimed to analyze whether investment projects in planted forests of Pinus elliottii Engelm. are economically feasible, by applying a real options analysis. We used empirical data from one hectare of a planted forest of P. elliottii with a 14-year planning horizon. Managerial flexibilities were incorporated in combinations and also separately, as options to defer, expand or abandon the investment project. Through Monte Carlo simulation, the present value of USD 1.016 was conditioned to anticipated return values from the second to the fourteenth year, with a volatility return of 14.5%. With real options analysis, the value of the combined options was USD 29, which, in terms of traditional net present value, showed an expanded net present value of USD 468. The real options analysis thus shows that investment projects in planted forests of P. elliottii are economically feasible. Given that real options analysis is a methodology not widely used in the forestry sector for economic analysis of investment projects, this study can be used to assist forest managers in analysing investment risks and decisions, specifically those related to market fluctuations of planted forests of Pinus spp., assuming that the real options of deferral, expansion and abandonment of an investment project are used.

show abstract

“…NPV technique is usually used to evaluate the investment to either invest now or never and it is not adding the flexibility and uncertainty options available in the real worlds. Real option approach allows to evaluate the energy projects options in terms of uncertainty in addition to evaluate the flexibility options such as expansion, abandonment, or postponement in specific time (Nunes et al, 2021).…”

Section: Real Options In Applied Contextmentioning

confidence: 99%

Economic Risk of Wind Farm Investments in UAE: Evaluation through Real Options Approach

Sisodia,

Al Mazrouei,

Mohnot

et al. 2023

IJEEP

View full text Add to dashboard Cite

This study examines the potential of business investments in wind offshore farm in the United Arab Emirates through projection of five different possible scenarios. The evaluation was done by using real option approach and Monte Carlo simulation imbibing the potential risk on investment with the source of funds used. Our analysis indicates that the return on investments and the risk on delay option remain at the highest degree if the project is financed with 50% government support and 50% investor’s own equity. On the contrary, a 100% bank-financed project yields lowest investments return and lowest risk option to delay. This implies that the financial leverage and the high bank interest rate are significant factors in influencing the economic risk and return of the wind farm project. This research contributes to the existing literature by highlighting the significance of real options application in the most-sought energy sector – wind farm. Moreover, this will pave way for small and medium enterprises (SMEs) in the UAE to invest in this energy field.

show abstract

Switch and defer option in renewable energy projects: Evidences from Brazil

Cited by 19 publications

References 34 publications

Real Options and their application in renewable energy projects. State-of-the-art review

Real Options and their application in renewable energy projects. State-of-the-art review

Real options analysis applied to investment projects in planted forests of Pinus

Economic Risk of Wind Farm Investments in UAE: Evaluation through Real Options Approach

Contact Info

Product

Resources

About