Investment Threshold Model for Power Generator and Its Analysis Based on Real Option

This paper employed the theory of real option to analyze investment decision-making for power generator in a completely competitive power market, a investment threshold model considered power bidding of power generator and their quadratic production cost function was presented. The results of the model were simulated and analyzed with the Matlab software, and the results indicated that the main conclusions were coincident with power economic life. Furthermore, we concluded that it would contribute a lot to the power industry´s market-oriented reforms and the investment decision-making for power generator in both theory and practice.