Abstract
The port of Rotterdam is the largest seaport in Europe. To maintain its position, the harbor will have to anticipate global transitions such as transferring to sustainable energy. Hydrogen is seen as a promising energy carrier; however, future demand is uncertain. The current research investigates decision making under uncertainty and values flexibility. Compound real options analysis is applied to optimize the time-variant expansion strategies for a hydrogen pipe network. The trade-off between early investments and missed revenues when not investing in time determines the optimized expansion strategy. Moreover, the real options approach also provides the levelized unit price for hydrogen distribution, to cover the life cycle costs of the optimal expansion strategy. Finally, this real options approach offers flexibility to a decision maker as it allows for enhancing future decisions. The academic contribution of this research is a distinct perspective on a compound real options approach where the optimal strategic path is the key result of interest. This in contrast to other real options applications in the literature which focus on option value, exchange with limiting the options or do not visualize a strategic path. Moreover, this research demonstrates how stepwise expansion and decision making under uncertainty facilitate transitions such as the transition toward clean energy.
Highlights
Introduction published maps and institutional affilGlobal warming imposes severe threats to ecosystems and especially to densely populated urban deltas which are prone to flooding [1,2,3]
The Intergovernmental Panel on Climate Change (IPCC) stresses the importance of keeping global warming below its critical threshold, but this requires huge and radical transformations to reduce greenhouse gasses that emerge from burning fossil fuels
It states that for a break-even situation, the most optimal expansion strategy is to expand the current capacity to 4.8 metric tons per year (Mt/y), 11.7 Mt/y and 21.1 Mt/y in the years 2020, 2030 and 2040, respectively
Summary
Global warming imposes severe threats to ecosystems and especially to densely populated urban deltas which are prone to flooding [1,2,3]. The Intergovernmental Panel on Climate Change (IPCC) warns of unprecedented consequences of global warming beyond. The IPCC stresses the importance of keeping global warming below its critical threshold, but this requires huge and radical transformations to reduce greenhouse gasses that emerge from burning fossil fuels. The IPCC foresees a growing demand for energy. Ports and especially seaports play an important role in this growing demand for clean energy as being energy generators, consumers and transporters [5,6]. Ports consume energy for their logistics operations. Port industry and shipping consume large amounts of energy. Ports generate energy and benefit from their locations and natural resources iations
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