How to Proceed with Competing Alternative Energy Technologies: a Real Options Analysis

By Afzal S. Siddiqui, Stein-Erik Fleten. 2010

128 citations recorded by the source corpus.

Concerns with CO2 emissions are creating incentives for the development and deployment of energy technologies that do not use fossil fuels. Indeed, such technologies would provide tangible benefits in terms of avoided fossil-fuel costs, which are likely to increase as restrictions on CO2 emissions are imposed. However, there are a number of challenges that need to be overcome, and the current costs of developing new alternative energy technologies would be too high to be handled privately. We analyse how a government may proceed with a staged development of meeting electricity demand as fossil-fuel sources are being phased out. A large-scale, new alternative technology is one possibility, where one would start a major research and development programme as an intermediate step. Alternatively, the government could choose to deploy an existing renewable energy technology, and using the real options framework, we compare the two projects to provide policy implications on how one might proceed.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f8826265878a2d52b518cb1381fc29587d60ebfb

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In Economics and Econometrics

1. B. Fernandes
2. Paula F. V. Ferreira
3. J. Cunha
4. Stein-Erik Fleten
5. Nigel Meade

In Finance

1. B. Fernandes
2. Paula F. V. Ferreira
3. J. Cunha
4. Trine Krogh Boomsma
5. Stein-Erik Fleten
6. Nigel Meade

Citations in the corpus

• Renewable energy investments under different support schemes: A real options approach (2012, background): “One way to handle market incompleteness is to assume an exogenous discount rate, see for example [46].”
• The use of real options approach in energy sector investments (2011, background): “Siegel et al. 1987 Oil industry Pde [30] Paddock et al. 1988 Oil industry Pde [31] Ekern 1988 Oil industry Binomial option valuation [32] Dixit and Pindyck 1994 Book: case studies in energy sector [9] Trigeorgis 1996 Book: case studies in energy sector [33] Amram and Kulatilaka 1999 Book: case studi”