Dissertation Writing Help - Valuing power plants under emission reduction regulations and investing in new technologies: An exchange option on real options
I need a Custom Dissertation Writing Service on "Valuing power plants under emission reduction regulations and investing in new technologies: An exchange option on real options"
In this dissertation we model the value of a power generation asset through a real option approach. With electricity, fuel and emission allowances we express every essential uncertainty on the energy market by an own stochastic process and derive an optimal clean spark spread. Typical operational constraints of a power plant are taken into account. Besides analysing the behaviour of the generation asset under different constraints, we want to evaluate the option to invest in new technologies to improve these constraints. In this dissertation, we do not set up the standard American option with strike equal to the investment as usual, but set up an exchange option on two real options with different constraints. We show that this approach handles an option on new technology much more sensitive to the individual price uncertainties and considers all possible employments. If the intrinsic value of the exchange option exceeds the realization costs, it is time to invest. We also state an explicit Monte Carlo algorithm and present numerical results for the option to install a Carbon Capture and Storage unit.