Power plant multistage investment under market uncertainty

P. F. Correia*, P. M.S. Carvalho, L. A.F.M. Ferreira, J. Guedes, J. Sousa

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

Power plants whose production will be sold in a market context must be evaluated, taking into account market variables such as fuel, emissions and electricity prices. These variables have a stochastic behaviour, and therefore the power plant's present value is also stochastic. Using a stochastic process to estimate the power plant's present value, the best plan for investment can be devised to extract the maximum project value. This is achieved by considering multiple investment stages together with the possibility of postponing or abandoning the project when market conditions are unfavourable. The focus of the paper is on establishing the market-based value of a power plant and on determining the best execution of investment when it is done in multiple, modular stages. A comprehensive methodology is developed to establish a process for the plant present value, and to derive the optimal execution policy for investment.
Original languageEnglish
Pages (from-to)149-157
Number of pages9
JournalIET Generation, Transmission and Distribution
Volume2
Issue number1
DOIs
Publication statusPublished - 2008

Fingerprint

Dive into the research topics of 'Power plant multistage investment under market uncertainty'. Together they form a unique fingerprint.

Cite this