Time-dependent opportunities in energy business: a comparative study of locally available renewable and conventional fuels

Athanasios I. Tolis, Athanasios A. Rentizelas, Ilias P. Tatsiopoulos

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This work investigates and compares energy-related, private business strategies, potentially interesting for investors willing to exploit either local biomass sources or strategic conventional fuels. Two distinct fuels and related power-production technologies are compared as a case study, in terms of economic efficiency: the biomass of cotton stalks and the natural gas. The carbon capture and storage option are also investigated for power plants based on both fuel types. The model used in this study investigates important economic aspects using a "real options" method instead of traditional Discounted Cash Flow techniques, as it might handle in a more effective way the problems arising from the stochastic nature of significant cash flow contributors' evolution like electricity, fuel and CO(2) allowance prices. The capital costs have also a functional relationship with time, thus providing an additional reason for implementing, "real options" as well as the learning-curves technique. The methodology as well as the results presented in this work, may lead to interesting conclusions and affect potential private investment strategies and future decision making. This study indicates that both technologies lead to positive investment yields, with the natural gas being more profitable for the case study examined, while the carbon capture and storage does not seem to be cost efficient with the current CO(2) allowance prices. Furthermore, low interest rates might encourage potential investors to wait before actualising their business plans while higher interest rates favor immediate investment decisions. (C) 2009 Elsevier Ltd. All rights reserved.

LanguageEnglish
Pages384-393
Number of pages10
JournalRenewable and Sustainable Energy Reviews
Volume14
Issue number1
DOIs
Publication statusPublished - Jan 2010

Fingerprint

Carbon capture
Industry
Natural gas
Biomass
Economics
Cotton
Costs
Power plants
Electricity
Decision making

Keywords

  • investment optimisation
  • carbon capture
  • real options
  • forecasting
  • biomass
  • natural gas

Cite this

@article{8c777ac5266947cfae4485a6427a2a9b,
title = "Time-dependent opportunities in energy business: a comparative study of locally available renewable and conventional fuels",
abstract = "This work investigates and compares energy-related, private business strategies, potentially interesting for investors willing to exploit either local biomass sources or strategic conventional fuels. Two distinct fuels and related power-production technologies are compared as a case study, in terms of economic efficiency: the biomass of cotton stalks and the natural gas. The carbon capture and storage option are also investigated for power plants based on both fuel types. The model used in this study investigates important economic aspects using a {"}real options{"} method instead of traditional Discounted Cash Flow techniques, as it might handle in a more effective way the problems arising from the stochastic nature of significant cash flow contributors' evolution like electricity, fuel and CO(2) allowance prices. The capital costs have also a functional relationship with time, thus providing an additional reason for implementing, {"}real options{"} as well as the learning-curves technique. The methodology as well as the results presented in this work, may lead to interesting conclusions and affect potential private investment strategies and future decision making. This study indicates that both technologies lead to positive investment yields, with the natural gas being more profitable for the case study examined, while the carbon capture and storage does not seem to be cost efficient with the current CO(2) allowance prices. Furthermore, low interest rates might encourage potential investors to wait before actualising their business plans while higher interest rates favor immediate investment decisions. (C) 2009 Elsevier Ltd. All rights reserved.",
keywords = "investment optimisation, carbon capture, real options, forecasting, biomass, natural gas",
author = "Tolis, {Athanasios I.} and Rentizelas, {Athanasios A.} and Tatsiopoulos, {Ilias P.}",
year = "2010",
month = "1",
doi = "10.1016/j.rser.2009.07.027",
language = "English",
volume = "14",
pages = "384--393",
journal = "Renewable and Sustainable Energy Reviews",
issn = "1364-0321",
number = "1",

}

Time-dependent opportunities in energy business : a comparative study of locally available renewable and conventional fuels. / Tolis, Athanasios I.; Rentizelas, Athanasios A.; Tatsiopoulos, Ilias P.

In: Renewable and Sustainable Energy Reviews , Vol. 14, No. 1, 01.2010, p. 384-393.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Time-dependent opportunities in energy business

T2 - Renewable and Sustainable Energy Reviews

AU - Tolis, Athanasios I.

AU - Rentizelas, Athanasios A.

AU - Tatsiopoulos, Ilias P.

PY - 2010/1

Y1 - 2010/1

N2 - This work investigates and compares energy-related, private business strategies, potentially interesting for investors willing to exploit either local biomass sources or strategic conventional fuels. Two distinct fuels and related power-production technologies are compared as a case study, in terms of economic efficiency: the biomass of cotton stalks and the natural gas. The carbon capture and storage option are also investigated for power plants based on both fuel types. The model used in this study investigates important economic aspects using a "real options" method instead of traditional Discounted Cash Flow techniques, as it might handle in a more effective way the problems arising from the stochastic nature of significant cash flow contributors' evolution like electricity, fuel and CO(2) allowance prices. The capital costs have also a functional relationship with time, thus providing an additional reason for implementing, "real options" as well as the learning-curves technique. The methodology as well as the results presented in this work, may lead to interesting conclusions and affect potential private investment strategies and future decision making. This study indicates that both technologies lead to positive investment yields, with the natural gas being more profitable for the case study examined, while the carbon capture and storage does not seem to be cost efficient with the current CO(2) allowance prices. Furthermore, low interest rates might encourage potential investors to wait before actualising their business plans while higher interest rates favor immediate investment decisions. (C) 2009 Elsevier Ltd. All rights reserved.

AB - This work investigates and compares energy-related, private business strategies, potentially interesting for investors willing to exploit either local biomass sources or strategic conventional fuels. Two distinct fuels and related power-production technologies are compared as a case study, in terms of economic efficiency: the biomass of cotton stalks and the natural gas. The carbon capture and storage option are also investigated for power plants based on both fuel types. The model used in this study investigates important economic aspects using a "real options" method instead of traditional Discounted Cash Flow techniques, as it might handle in a more effective way the problems arising from the stochastic nature of significant cash flow contributors' evolution like electricity, fuel and CO(2) allowance prices. The capital costs have also a functional relationship with time, thus providing an additional reason for implementing, "real options" as well as the learning-curves technique. The methodology as well as the results presented in this work, may lead to interesting conclusions and affect potential private investment strategies and future decision making. This study indicates that both technologies lead to positive investment yields, with the natural gas being more profitable for the case study examined, while the carbon capture and storage does not seem to be cost efficient with the current CO(2) allowance prices. Furthermore, low interest rates might encourage potential investors to wait before actualising their business plans while higher interest rates favor immediate investment decisions. (C) 2009 Elsevier Ltd. All rights reserved.

KW - investment optimisation

KW - carbon capture

KW - real options

KW - forecasting

KW - biomass

KW - natural gas

U2 - 10.1016/j.rser.2009.07.027

DO - 10.1016/j.rser.2009.07.027

M3 - Article

VL - 14

SP - 384

EP - 393

JO - Renewable and Sustainable Energy Reviews

JF - Renewable and Sustainable Energy Reviews

SN - 1364-0321

IS - 1

ER -