Abstract
Investment analysis is a crucial process for any investment’s success. This process can be supported by both the discounted cash flow analysis and the real options analysis. Many researchers have point out restrictions for the first one, in cases of uncertainty in the entrepreneurial environment. The main types of uncertainty, concerning the wind energy sector, include uncertainties related to the price of electriticity by RES, the public policy regulatory policies, the demand, the initial capital costs, the technological progress, the weather conditions, the political and economical situations and generally the RES market structure. In this paper, we try to find the optimal investment strategy in a liberalized global electricity market, where the price of electricity is uncertain while the other parameters are configured separately in each country. The authors consider about the factors of the time for investment and the electricity’s price level, in wind energy by using the real options theory. The authors select a variety of data for the wind energy industry from different countries in several continents, and also create a model for the investment analysis in this entrepreneurial sector.
Highlights
Real options theory provides important ideas and appropriate techniques, modeling investment decision-making problems, in a changing environment, where instability and uncertainty are high. Yeo and Qui (2003) note that “since the early 1980s, advances in real option literature have fundamentally changed the way people think about investment opportunities”. Myers (1977) was the first to use the term real options
Through a sensitivity analysis we examine, how the degree of uncertainty in electricity prices ı, the size of grants in the cost of capital Ǽ%, the speed of return to the mean ȟ, the long-term price level ș, and the interest rate r affects the optimal investment rule
It is clear that when the fluctuation in the prices of futures contracts ı increases, the uncertainty increases
Summary
The record number of 51.5 GW of wind power installed in 2014, bringing the total installed global capacity to more than 369.6 GW at the end of 2014. 268.000 wind turbines are spinning around the world and 608 million tonnes of CO2 emissions are avoided, globally, due to the wind energy at the end of 2014. China and Denmark have the lowest installed capital costs for new onshore projects of between USD 1.300/kW and USD 1.384/Kw in 2010 (ǿǼǹ Wind, 2011) These countries host a heavy industry of wind turbines and play a very important role as the major manufacturers of necessary components for renewable projects. There are countries with a high density of specialized institutions and universities, which play an important role in international photovoltaic research & development (R&D) All these factors can affect the final cost of investment in wind energy projects. The above mentioned cuts of in feed-in tariffs, in mature markets (Germany, Spain, France, Italy), and in emerging markets(Czech Republic, Greece and Bulgaria), forced the investors to look for new opportunities in South-East European (SEE) nations Romania is presenting such a very interesting investment alternative.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
