Strategic investments for existing power plants

Grigoris Varympopiotis, Athanasios Tolis, Athanasios Rentizelas, Ilias Tatsiopoulos, Konstantin Aravossis

Research output: Chapter in Book/Report/Conference proceedingConference contribution book

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Abstract

A model to investigate a fuel based optimality approach for strategic investments in the power sector is presented. The innovative concept of switching between the available operating fuel sources of the power plant over its lifetime is examined. More specifically, the case study examined, concerns an existing lignite power plant that may switch its fuel to natural gas, and from that point on it may either switch back to lignite or retain natural gas or routinely switch between the alternative fuels. This research concentrates on the electricity market of Greece, for the period of 2010-2030. Probabilistic models to forecast future prices are used in conjunction with a real options model to cope with alternative strategies. Depending on the economical and environmental standings of each period, the power plant can alter its input fuel to maximize profits or reduce emissions. Therefore, more options for the operating fuel emerge, thus reducing business risks and exploiting the most profitable operational option in response to markets instabilities (i.e. fuel price differences over time, emissions cost fluctuation, etc.). Strategic flexibility, security of supply, stability, and increased profits are the potential advantages of the presented model dealing with energy investments.
Original languageEnglish
Title of host publicationProceedings of the Third International Conference on Environmental Management, Engineering, Planning and Economics (CEMEPE 2011)
Place of PublicationSkiathos, Greece
Publication statusPublished - Jun 2011

Keywords

  • electricity
  • power sector
  • flexibility
  • strategic investment
  • fuel switching

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    Varympopiotis, G., Tolis, A., Rentizelas, A., Tatsiopoulos, I., & Aravossis, K. (2011). Strategic investments for existing power plants. In Proceedings of the Third International Conference on Environmental Management, Engineering, Planning and Economics (CEMEPE 2011)