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Compound real options valuation of renewable energy projects: The case of a wind farm in Serbia

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  • Loncar, Dragan
  • Milovanovic, Ivan
  • Rakic, Biljana
  • Radjenovic, Tamara

Abstract

Renewable energy sources have become a very important issue due to environmental and sustainability concerns. In addition, most renewable energy electricity generation (RES-E) projects are characterized by considerable uncertainty and sequential decision-making. These projects’ net present value (NPV) is very often close to zero, which renders them a good candidate for the application of real options valuation methodology of investment project appraisal.

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  • 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.
    • Handle: RePEc:eee:rensus:v:75:y:2017:i:c:p:354-367
    DOI: 10.1016/j.rser.2016.11.001
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    5. Barrows, S.E. & Homer, J.S. & Orrell, A.C., 2021. "Valuing wind as a distributed energy resource: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
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    13. 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).
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    More about this item

    Keywords

    Renewable energy sources; Electricity generation projects; Wind farm; Binomial tree; Capacity factor; Feed-in-tariffs;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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