IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v143y2018icp257-272.html
   My bibliography  Save this article

A real option assessment of flexibilities in the integrated planning of natural gas distribution network and distributed natural gas-fired power generations

Author

Listed:
  • Odetayo, Babatunde
  • MacCormack, John
  • Rosehart, W.D.
  • Zareipour, Hamidreza

Abstract

There is an increasing integration of distributed natural gas-fired electric power generations across the globe. The natural gas-fired power generators are dependent on the availability of reliable natural gas distribution systems. This interdependency coupled with the scalability of the natural gas-fired distributed power generators presents the management of an energy utility with real options to execute, delay or abandon long-term expansion plans based on new realities of electric power demand. A real options analysis of these flexibilities is carried out in this paper. The assessment of these options includes the identification and valuation of the identified options. The value of flexibilities and options is illustrated by assessing the options to implement, delay or abandon expansion plans in the presence of uncertain electric power demand on 9 and 33 bus electricity distribution systems.

Suggested Citation

  • Odetayo, Babatunde & MacCormack, John & Rosehart, W.D. & Zareipour, Hamidreza, 2018. "A real option assessment of flexibilities in the integrated planning of natural gas distribution network and distributed natural gas-fired power generations," Energy, Elsevier, vol. 143(C), pages 257-272.
    • Handle: RePEc:eee:energy:v:143:y:2018:i:c:p:257-272
    DOI: 10.1016/j.energy.2017.10.114
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544217318200
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2017.10.114?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Schachter, J.A. & Mancarella, P., 2016. "A critical review of Real Options thinking for valuing investment flexibility in Smart Grids and low carbon energy systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 56(C), pages 261-271.
    2. Yang, Ming & Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom, 2008. "Evaluating the power investment options with uncertainty in climate policy," Energy Economics, Elsevier, vol. 30(4), pages 1933-1950, July.
    3. Amirnekooei, K. & Ardehali, M.M. & Sadri, A., 2017. "Optimal energy pricing for integrated natural gas and electric power network with considerations for techno-economic constraints," Energy, Elsevier, vol. 123(C), pages 693-709.
    4. Kumbaroglu, Gürkan & Madlener, Reinhard & Demirel, Mustafa, 2008. "A real options evaluation model for the diffusion prospects of new renewable power generation technologies," Energy Economics, Elsevier, vol. 30(4), pages 1882-1908, July.
    5. Odetayo, Babatunde & MacCormack, John & Rosehart, William D. & Zareipour, Hamidreza, 2017. "A sequential planning approach for Distributed generation and natural gas networks," Energy, Elsevier, vol. 127(C), pages 428-437.
    6. Hamedi, Maryam & Zanjirani Farahani, Reza & Husseini, Mohammad Moattar & Esmaeilian, Gholam Reza, 2009. "A distribution planning model for natural gas supply chain: A case study," Energy Policy, Elsevier, vol. 37(3), pages 799-812, March.
    7. A. Charnes & W. W. Cooper, 1959. "Chance-Constrained Programming," Management Science, INFORMS, vol. 6(1), pages 73-79, October.
    8. Zeng, Qing & Zhang, Baohua & Fang, Jiakun & Chen, Zhe, 2017. "A bi-level programming for multistage co-expansion planning of the integrated gas and electricity system," Applied Energy, Elsevier, vol. 200(C), pages 192-203.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mateo, C. & Frías, P. & Tapia-Ahumada, K., 2020. "A comprehensive techno-economic assessment of the impact of natural gas-fueled distributed generation in European electricity distribution networks," Energy, Elsevier, vol. 192(C).
    2. Dokic, Svjetlana B. & Rajakovic, Nikola Lj., 2019. "Security modelling of integrated gas and electrical power systems by analyzing critical situations and potentials for performance optimization," Energy, Elsevier, vol. 184(C), pages 141-150.
    3. Yamchi, Hamid Bakhshi & Safari, Amin & Guerrero, Josep M., 2021. "A multi-objective mixed integer linear programming model for integrated electricity-gas network expansion planning considering the impact of photovoltaic generation," Energy, Elsevier, vol. 222(C).
    4. Jiangang Shi & Kaifeng Duan & Shiping Wen & Rui Zhang, 2019. "Investment Valuation Model of Public Rental Housing PPP Project for Private Sector: A Real Option Perspective," Sustainability, MDPI, vol. 11(7), pages 1-18, March.
    5. Liu, Yuanxin & Zheng, Ruijin & Chen, Sisi & Yuan, Jiahai, 2019. "The economy of wind-integrated-energy-storage projects in China's upcoming power market: A real options approach," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    6. Glensk, Barbara & Madlener, Reinhard, 2019. "The value of enhanced flexibility of gas-fired power plants: A real options analysis," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    7. Daniel Then & Christian Spalthoff & Johannes Bauer & Tanja M. Kneiske & Martin Braun, 2020. "Impact of Natural Gas Distribution Network Structure and Operator Strategies on Grid Economy in Face of Decreasing Demand," Energies, MDPI, vol. 13(3), pages 1-33, February.
    8. Qüinny Soares Rocha & Rafaele Almeida Munis & Richardson Barbosa Gomes da Silva & Elí Wilfredo Zavaleta Aguilar & Danilo Simões, 2023. "Photovoltaic Solar Energy in Forest Nurseries: A Strategic Decision Based on Real Options Analysis," Sustainability, MDPI, vol. 15(5), pages 1-11, February.
    9. Liu, Haomin & Zhang, Zaixu & Zhang, Tao, 2022. "Shale gas investment decision-making: Green and efficient development under market, technology and environment uncertainties," Applied Energy, Elsevier, vol. 306(PA).
    10. Hosseini, Seyed Hamid Reza & Allahham, Adib & Walker, Sara Louise & Taylor, Phil, 2020. "Optimal planning and operation of multi-vector energy networks: A systematic review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Romano, Teresa & Fumagalli, Elena, 2018. "Greening the power generation sector: Understanding the role of uncertainty," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 272-286.
    2. Hosseini, Seyed Hamid Reza & Allahham, Adib & Walker, Sara Louise & Taylor, Phil, 2020. "Optimal planning and operation of multi-vector energy networks: A systematic review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).
    3. Zhang, Mingming & Liu, Liyun & Wang, Qunwei & Zhou, Dequn, 2020. "Valuing investment decisions of renewable energy projects considering changing volatility," Energy Economics, Elsevier, vol. 92(C).
    4. Chen, Siyuan & Zhang, Qi & Wang, Ge & Zhu, Lijing & Li, Yan, 2018. "Investment strategy for underground gas storage facilities based on real option model considering gas market reform in China," Energy Economics, Elsevier, vol. 70(C), pages 132-142.
    5. Mo, Jian-Lei & Schleich, Joachim & Zhu, Lei & Fan, Ying, 2015. "Delaying the introduction of emissions trading systems—Implications for power plant investment and operation from a multi-stage decision model," Energy Economics, Elsevier, vol. 52(PB), pages 255-264.
    6. Farrokhifar, Meisam & Nie, Yinghui & Pozo, David, 2020. "Energy systems planning: A survey on models for integrated power and natural gas networks coordination," Applied Energy, Elsevier, vol. 262(C).
    7. Schachter, Jonathan A. & Mancarella, Pierluigi & Moriarty, John & Shaw, Rita, 2016. "Flexible investment under uncertainty in smart distribution networks with demand side response: Assessment framework and practical implementation," Energy Policy, Elsevier, vol. 97(C), pages 439-449.
    8. Moon, Yongma & Baran, Mesut, 2018. "Economic analysis of a residential PV system from the timing perspective: A real option model," Renewable Energy, Elsevier, vol. 125(C), pages 783-795.
    9. Zhang, M.M. & Wang, Qunwei & Zhou, Dequn & Ding, H., 2019. "Evaluating uncertain investment decisions in low-carbon transition toward renewable energy," Applied Energy, Elsevier, vol. 240(C), pages 1049-1060.
    10. Zhang, M.M. & Zhou, D.Q. & Zhou, P. & Chen, H.T., 2017. "Optimal design of subsidy to stimulate renewable energy investments: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 873-883.
    11. Dranka, Géremi Gilson & Ferreira, Paula & Vaz, A. Ismael F., 2021. "A review of co-optimization approaches for operational and planning problems in the energy sector," Applied Energy, Elsevier, vol. 304(C).
    12. Hervé-Mignucci, Morgan, 2011. "Rôle du signal prix du carbone sur les décisions d'investissement des entreprises," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8200 edited by Keppler, Jan Horst.
    13. Sandrine Mathy & Patrick Criqui & Katharina Knoop & Manfred Fischedick & Sascha Samadi, 2016. "Uncertainty management and the dynamic adjustment of deep decarbonization pathways," Climate Policy, Taylor & Francis Journals, vol. 16(sup1), pages 47-62, June.
    14. Loncar, Dragan & Milovanovic, Ivan & Rakic, Biljana & Radjenovic, Tamara, 2017. "Compound real options valuation of renewable energy projects: The case of a wind farm in Serbia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 354-367.
    15. Masoud Khatibi & Abbas Rabiee & Amir Bagheri, 2023. "Integrated Electricity and Gas Systems Planning: New Opportunities, and a Detailed Assessment of Relevant Issues," Sustainability, MDPI, vol. 15(8), pages 1-32, April.
    16. Wang, Xingwei & Cai, Yanpeng & Dai, Chao, 2014. "Evaluating China's biomass power production investment based on a policy benefit real options model," Energy, Elsevier, vol. 73(C), pages 751-761.
    17. Dokic, Svjetlana B. & Rajakovic, Nikola Lj., 2019. "Security modelling of integrated gas and electrical power systems by analyzing critical situations and potentials for performance optimization," Energy, Elsevier, vol. 184(C), pages 141-150.
    18. de Oliveira, Denis Luis & Brandao, Luiz E. & Igrejas, Rafael & Gomes, Leonardo Lima, 2014. "Switching outputs in a bioenergy cogeneration project: A real options approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 36(C), pages 74-82.
    19. Zhang, M.M. & Zhou, P. & Zhou, D.Q., 2016. "A real options model for renewable energy investment with application to solar photovoltaic power generation in China," Energy Economics, Elsevier, vol. 59(C), pages 213-226.
    20. Westner, Günther & Madlener, Reinhard, 2012. "Investment in new power generation under uncertainty: Benefits of CHP vs. condensing plants in a copula-based analysis," Energy Economics, Elsevier, vol. 34(1), pages 31-44.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:143:y:2018:i:c:p:257-272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.