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Models of Strategic Bidding in Electricity Markets Under Network Constraints Read chapter Read first chapter

2012 | OriginalPaper | Chapter

Investment Timing, Capacity Sizing, and Technology Choice of Power Plants

Authors : Ryuta Takashima, Afzal S. Siddiqui, Shoji Nakada

Published in: Handbook of Networks in Power Systems I

Publisher: Springer Berlin Heidelberg

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Abstract

Deregulation of electricity industries has created wholesale markets with uncertain prices and offered greater flexibility to investors to make decisions. In this chapter, we consider the problem of a typical investor who has discretion over not only the timing, but also the sizing of a new power plant. The interaction between these two types of managerial flexibility may be addressed analytically using the real options approach. Since an investor may also have discretion over technology choice, we allow for an investment opportunity in two mutually exclusive projects with embedded timing and sizing options. Via numerical examples, we illustrate how an investor may make decisions about timing, sizing, and technology choice. Sensitivity analyses to key parameters also highlight the intuition for how decisions are made.

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previous chapter The Economic Impact of Demand-Response Programs on Power Systems. A Survey of the State of the Art
next chapter Real Options Approach as a Decision-Making Tool for Project Investments: The Case of Wind Power Generation
Footnotes
1
In this paper, the cost, which we consider, contains no costs for building and operation of electric networks, and also on transport of electric energy to consumers. Thus, this paper doesn’t deal necessarily with transmission costs, but more with transmission planning (see Sauma and Oren [22]).
 
2
Although Dangl [20] considers the investment timing and the plant sizing with operational flexibility, as described previously, in this chapter we assume that the power plant does not have such discretion.
 
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Metadata
Title
Investment Timing, Capacity Sizing, and Technology Choice of Power Plants
Authors
Ryuta Takashima
Afzal S. Siddiqui
Shoji Nakada
Copyright Year
2012
Publisher
Springer Berlin Heidelberg
Book
Handbook of Networks in Power Systems I

Print ISBN: 978-3-642-23192-6

Electronic ISBN: 978-3-642-23193-3

Copyright Year: 2012

DOI
https://doi.org/10.1007/978-3-642-23193-3_12

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