A simulation based real options approach for the investment evaluation of nuclear power

A simulation based real options approach for the investment evaluation of nuclear power

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Article ID: iaor20125790
Volume: 63
Issue: 3
Start Page Number: 585
End Page Number: 593
Publication Date: Nov 2012
Journal: Computers & Industrial Engineering
Authors:
Keywords: nuclear power, real options
Abstract:

The investment of nuclear power has several uncertainties. This paper establishes a nuclear power investment evaluation model by employing real options theory with Monte Carlo method to evaluate the value of nuclear power plant from the perspective of power generation enterprises. Several technical and economic uncertainty factors (investment cost, generating cost, electricity prices and nuclear accident) have been taken into account in the model and the model is solved by Least Squares Monte‐Carlo (LSM) method. As an application, the model is used to evaluate Sanmen nuclear power plant in Zhejiang province, China. The impacts of three electricity price mechanisms and nuclear power investment cost reduction are investigated and discussed.

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