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Real options valuation of fusion energy R&D programme

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  • Bednyagin, Denis
  • Gnansounou, Edgard

Abstract

This paper aims to perform a real options valuation of fusion energy R&D programme. Strategic value of thermonuclear fusion technology is estimated here based on the expected cash flows from construction and operation of fusion power plants and the real options value arising due to managerial flexibility and the underlying uncertainty. First, a basic investment option model of Black-Scholes type is being considered. Then, a fuzzy compound real R&D option model is elaborated, which reflects in a better way the multi-stage nature of the programme and takes into account the imprecision of information as one of the components of the overall programme uncertainty. Two different strategies are compared: "Baseline" corresponding to a relatively moderate pace of fusion research, development, demonstration and deployment activities vs. "Accelerated" strategy, which assumes a rapid demonstration and massive deployment of fusion. The conclusions are drawn from the model calculations regarding the strategic value of fusion energy R&D and the advantages of accelerated development path.

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  • Bednyagin, Denis & Gnansounou, Edgard, 2011. "Real options valuation of fusion energy R&D programme," Energy Policy, Elsevier, vol. 39(1), pages 116-130, January.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:1:p:116-130
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    Cited by:

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    6. Bednyagin, Denis & Gnansounou, Edgard, 2012. "Estimating spillover benefits of large R&D projects: Application of real options modelling approach to the case of thermonuclear fusion R&D programme," Energy Policy, Elsevier, vol. 41(C), pages 269-279.
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    9. Felipe Isaza Cuervo & Sergio Botero Boterob, 2014. "Aplicación de las opciones reales en la toma de decisiones en los mercados de electricidad," Estudios Gerenciales, Universidad Icesi, November.

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