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

Hlouskova, Jaroslava; Kossmeier, Stephan; 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 (public): Special Journal Issue on Real Options
Status: Published
Date Deposited: 22 May 2015 08:45
Last Modified: 01 Apr 2016 14:19
Identification Number or DOI: 10.1016/j.rfe.2004.12.001
ISSN: 1058-3300 (Print), 1873-5924 (Online)
URI: https://irihs.ihs.ac.at/id/eprint/3386

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