Research and Application of Power Network Investment Decision-making Model based on Fuzzy Real Options

When estimating investment projects, traditional net present value (NPV) method ignores uncertainty and flexibility of investment project such as irreversible trait of investment project, opportunity cost of investment itself and so on. Accordingly, traditional method often results in mistaken judgment. The authors compared the application of traditional NPV method with real options in investment evaluation, analyzed the uncertainty of power grid investment project, discussed how to make the investment decision when investment cost and cash flow both are fuzzy numbers, and introduce fuzzy expectation and fuzzy variance concept to construct evaluation model. In the end authors performed a simulation to show the validity.