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| 1 |
ID:
115646
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| Publication |
2012.
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| Summary/Abstract |
Feed-in tariff program is an incentive plan that provides investors with a set payment for electricity generated from renewable energy sources that is fed into the power grid. As of today, FIT is being used by over 75 jurisdictions around the world and offers a number of design options to achieve policy goals. The objective of this paper is to propose a quantitative model, by which a specific FIT program can be evaluated and hence optimized. We focus on payoff structure, which has a direct impact on the net present value of the investment, and other parameters relevant to investor reaction and electricity prices. We combine cost modeling, option valuation, and consumer choice so as to simulate the performance of a FIT program of interest in various scenarios. The model is used to define an optimization problem from a policy maker's perspective, who wants to increase the contribution of renewable energy to the overall energy supply, while keeping the total burden on ratepayers under control. Numerical studies shed light on the interactions among design options, program parameters, and the performance of a FIT program.
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| 2 |
ID:
150785
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| Summary/Abstract |
China is planning to introduce emission trading scheme (ETS) to decrease CO2 emission. As low carbon energy (LCE) will play a pivotal role in reducing CO2 emissions, our paper is to assess the extent and the conditions under which a carbon ETS can deliver LCE investment in China. We chose wind technology as a case study and a real-option based model was built to explore the impact of a number of variables and design features on investment decisions, e.g. carbon and electricity price, carbon market risk, carbon price floor and ceiling and on-grid ratio. We compute critical values of these variables and features and explore trade-offs among them. According to our work, a carbon ETS has a significant effect on wind power plant investment although it cannot support investment in wind power on its own. Carbon price stabilization mechanisms such as carbon price floor can significantly improve the effect of carbon ETS but the critical floor to support investment is still much higher than the carbon price in China pilot ETSs. Our results show that other policy measures will be needed to promote low-carbon energy development in China.
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| 3 |
ID:
175261
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| Summary/Abstract |
The Chinese government plans to adopt a low or no subsidy policy mechanism on renewable energy power development in the future. To achieve a balance between reducing financial burden on the government and ensuring profitability of investors as well as to account for the regional differences in China, a novel regional wind power grid feed-in tariff benchmark price mechanism by Net Present Value (NPV) method and Real Option (RO) method is proposed in this paper. The results voice support on the appropriateness of gradually decreasing the wind feed-in tariff (FIT) benchmark price to as low as the coal-fired FIT. The proposed FIT price level is presented as a price range on the basis of a guaranteed Internal Rate of Return (IRR) falls in between 8% to 15% for wind power investors. The results indicate that the current FIT price should be readjusted and redistributed. Although the FIT price in Central and South China grids is recommended to be relatively high, the NPV of wind farm project value in six regional grids are at the same level.
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| 4 |
ID:
118851
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| Publication |
2013.
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| Summary/Abstract |
The clean development mechanism (CDM) provides a way of assisting sustainable development in developing countries for developed countries to reduce greenhouse gas (GHG) emissions. Despite its intended benefits, the primary CDM market decreased from US$5.8 billion in 2006 to US$1.5 billion in 2010. One of the primary reasons for the reduction of market size is that developed countries as investors have a high level of risks caused by the volatility of the market price for certified emission reductions (CERs). Another issue to be resolved is that developing countries as host countries cannot claim any right to the CERs produced on their own land. This paper presents a real option-based model for both parties (developed and developing countries) to have their fair share of profits and risks by controlling the uncertainty associated with the future value of CERs. A case study illustrated that the proposed model can effectively attract investors to CDM projects leading to mitigation of climate change.
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| 5 |
ID:
092818
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| Publication |
2009.
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| Summary/Abstract |
Investments in pump storage plants are expected to grow especially due to their ability to store an excess of supply from wind power plants. In order to evaluate these investments correctly the peculiarities of pump storage plants and the characteristics of liberalized power markets have to be considered. The main characteristics of power markets are the strong power price volatility and the occurrence of prices spikes. In this article a valuation model is developed capturing these aspects using power price simulation, optimization of unit commitment and capital market theory. This valuation model is able to value a future price-based unit commitment planning that corresponds to future scope of actions also called real options. The resulting real option value for the pump storage plant is compared with the traditional net present value approach. Because this approach is not able to evaluate scope of actions correctly it results in strongly smaller investment values and forces wrong investment decisions.
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