Real options and the value of generation capacity in the German electricity market

Hlouskova, Jaroslava and Kossmeier, Stephan and Obersteiner, Michael and Schnabl, Alexander (2005) Real options and the value of generation capacity in the German electricity market. Review of Financial Economics, 14 (3-4), pp. 297-310.

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Abstract or Table of Contents

In this paper we implement a real options model for the unit commitment problem of an electricity producing turbine in a liberalized market. The model accounts for various operating constraints of the turbine. Price uncertainty is captured by a mean reverting process with jumps and time-varying means to account for seasonality. We demonstrate how the model can be used to value an electricity producing turbine, make profit-maximizing commitment decisions and compute risk profiles of generating assets for risk management purposes.

Item Type: Article in Academic Journal
Additional Information: Special Journal Issue on Real Options
Status: Published
Date Deposited: 22 May 2015 08:45
Last Modified: 01 Apr 2016 14:19
URI: http://irihs.ihs.ac.at/id/eprint/3386

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