Use of Real Options in Nuclear Power Plant Valuation in the Presence of Uncertainty with CO2 Emission Credit

Kiriyama, Eriko; Suzuki, Atsuyuki

doi:10.3327/jnst.41.756

Cited by 17 publications

(10 citation statements)

References 14 publications

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“…Rothwell (2006) finds that returns on investment in nuclear plant need to be higher in a scenario with uncertain carbon prices than in a world with certain prices. Also Laurikka (2004), Laurikka and Koljonen (2006), Kiriyama and Suzuki (2004) deal with the influence of future uncertain emissions trading and with CO 2 penalties within a real options setup. In these models, the design of emissions trading schemes and the number of allowances that are freely distributed are main features of the overall model.…”

Section: Modelling Approachmentioning

confidence: 99%

Investment risks under uncertain climate change policy

et al. 2007

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Section: Modelling Approachmentioning

confidence: 99%

Investment risks under uncertain climate change policy

et al. 2007

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“…Rothwell (2006) found that returns on investment in nuclear plant need to be higher in a scenario with uncertain carbon prices than in a world with certain prices. Laurikka (2004) , Laurikka and Klojonen (2006) and Kiriyama and Suzuki (2004) deal with the infl uence of future uncertain emissions trading and with CO 2 penalties within a real options setup. In these models the design of emissions trading schemes and the number of allowances that are freely distributed are main features of the overall model.…”

Section: Evaluating Risk Using Real Optionsmentioning

confidence: 99%

Use of Real Options as a Policy-Analysis Tool

Blyth¹

2008

Analytical Methods for Energy Diversity &Amp; Security

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“…The first question arises because carbon price risk is an important factor in investment decision-making by energy companies. Kiriyama and Suzuki (2004) looks at the effects of carbon price and other uncertainties on the value of nuclear power assets and impacts, and shows that risk raises the financial threshold for investment decisions. Reedman et al (2006) and Kettunen et al (2008) look at the effect of uncertainty on the timing of various electricity generation technologies, and found that uptake varied significantly depending on investor's view of the risks.…”

Section: Introductionmentioning

confidence: 99%

Policy interactions, risk and price formation in carbon markets

et al. 2009

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a b s t r a c tCarbon pricing is an important mechanism for providing companies with incentives to invest in carbon abatement. Price formation in carbon markets involves a complex interplay between policy targets, dynamic technology costs, and market rules. Carbon pricing may under-deliver investment due to R&D externalities, requiring additional policies which themselves affect market prices. Also, abatement costs depend on the extent of technology deployment due to learning-by-doing. This paper introduces an analytical framework based on marginal abatement cost (MAC) curves with the aim of providing an intuitive understanding of the key dynamics and risk factors in carbon markets. The framework extends the usual static MAC representation of the market to incorporate policy interactions and some technology cost dynamics. The analysis indicates that supporting large-scale deployment of mature abatement technologies suppresses the marginal cost of abatement, sometimes to zero, whilst increasing total abatement costs. However, support for early stage R&D may reduce both total abatement cost and carbon price risk. An important aspect of the analysis is in elevating risk management considerations into energy policy formation, as the results of the stochastic modelling indicate wide distributions for the emergence of carbon prices and public costs around the policy expectations.

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Use of Real Options in Nuclear Power Plant Valuation in the Presence of Uncertainty with CO2 Emission Credit

Cited by 17 publications

References 14 publications

Investment risks under uncertain climate change policy

Investment risks under uncertain climate change policy

Use of Real Options as a Policy-Analysis Tool

Policy interactions, risk and price formation in carbon markets

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