CEU Electronic Theses and Dissertations, 2007
| Author | Dzyuba, Artem Sergeevich |
|---|---|
| Title | Clean Energy or Polluting Energy? A Real Options Approach to Investment in the Power Sector |
| Summary | In modern Europe traditional energy producers must cover emission of carbon dioxide with emission allowances, which are traded on carbon markets. I examine a problem of investment in a power plant when the price of CO2 emission allowances evolves stochastically. Three exclusive projects are available: coal-fired (severe polluter), gas-fired (moderate polluter) and wind (pollution free) power plants. I apply a real options approach to find out how a stochastic environment affects decision making under low and high gas prices. In the first scenario it is shown that under highly volatile CO2 price a phenomenon of project domination may arise: the moderate polluter becomes completely unattractive. However, if a gas-fired power plant is flexible enough then it is always worth considering as an option. I also study more realistic case when gas prices are high and gas projects have no value compared to coal or wind ones. |
| Supervisor | Baniak, Andrzej |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2007/c05dza01.pdf |
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