A novel framework to define the premium for investment in complementary renewable projects

Author

Campos Passos, Aderson ; Street, Alexandre ; Fanzeres, Bruno ; Bruno, Sergio

Author_Institution

Dept. of Comput. Eng., Mil. Inst. of Eng. (IME), Rio de Janeiro, Brazil

fYear

2014

fDate

18-22 Aug. 2014

Firstpage

1

Lastpage

7

Abstract

The joint investment in renewable sources can be seen as an efficient mechanism for mitigating the risk of generation investors. This article presents an innovative framework to calculate the premium of the option to invest in complementary renewable energy projects. To calculate this option value, the framework merges two models: the first is a hybrid robust and stochastic optimization model that defines the project value and percentage of each source in the portfolio; the second is the well-known Least Square Monte Carlo (LSM) simulation approach to evaluate American options. The results of this article intend to stimulate independent investors to take advantage of complementary renewable projects and government sectorial institutions, defining suitable incentives and policies.

Keywords

Monte Carlo methods; investment; power generation economics; power generation planning; renewable energy sources; risk management; share prices; stochastic programming; American option evaluation; complementary renewable energy projects; generation expansion planning; generation investor risk mitigation; government sectorial institutions; hybrid robust optimization model; joint investment; least square Monte Carlo simulation; portfolio; project value; renewable sources; stochastic optimization model; Contracts; Investment; Mathematical model; Optimization; Portfolios; Robustness; Stochastic processes; Generation Expansion Planning; Investment Framework; LSM; Real Options; Renewable Energy Complementarity; Robust and Stochastic Optimization;

fLanguage

English

Publisher

ieee

Conference_Titel

Power Systems Computation Conference (PSCC), 2014

Conference_Location

Wroclaw

Type

conf

DOI

10.1109/PSCC.2014.7038450

Filename

7038450