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Analyzing the Business Case for Hydrogen-Fuel Infrastructure Investments with Endogenous Demand in The Netherlands: A Real Options Approach

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  • Ye Li

    (Blue Sky Group, 1183AV Amsterdam, The Netherlands)

  • Clemens Kool

    (School of Businesss and Economics, Maastricht University, 6200MD Maastricht, The Netherlands)

  • Peter-Jan Engelen

    (Faculty of Business & Economics, University of Antwerp, 2000 Antwerpen, Belgium
    School of Economics, Utrecht University, 3584EC Utrecht, The Netherlands
    RODEO Research Center, 2000 Antwerpen, Belgium)

Abstract

This paper explicitly incorporated the impact that realized investments in new transportation infrastructure have on adoption speed in a real option framework for taking sustainable investment decisions under uncertainty and analyzed the consequences of this dependence for optimal business investment strategies. We used a modified Generalized Bass Model to shape the adoption diffusion process and incorporate this approach into an N-fold compound real option framework. We applied the combined model to the case study of the introduction of hydrogen fuel stations for hydrogen cars in the Netherlands. We performed a scenario analysis for six different transportation infrastructure investment strategies combined with four different parameterizations. The results show the risk of ignoring the potential interaction between the adoption process and the speed with which the required transportation infrastructure will become available. This may lead to suboptimal decisions with respect to the optimal timing of corporate investment spending, as well as with respect to the assessment of the overall feasibility of the project.

Suggested Citation

  • Ye Li & Clemens Kool & Peter-Jan Engelen, 2020. "Analyzing the Business Case for Hydrogen-Fuel Infrastructure Investments with Endogenous Demand in The Netherlands: A Real Options Approach," Sustainability, MDPI, vol. 12(13), pages 1-22, July.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:13:p:5424-:d:380628
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    4. Biggins, Flora & Kataria, Mohit & Roberts, Diarmid & Brown, Dr Solomon, 2022. "Green hydrogen investments: Investigating the option to wait," Energy, Elsevier, vol. 241(C).
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