Abstract
Geothermal power project should be carefully evaluated, because not only the project is large-scale and high-risk, but also huge investments are needed to make the project profitable. The purpose of this study is to evaluate and analyze the present value of the geothermal power plant projects in Indonesia using net present value and real options valuation approach to obtain better project value that indicates profitable investments. Project value determined based on Net Present Value (NPV). The Monte Carlo Simulation calculated NPV based on discount rate, production volume, and operation and maintenance (O&M) cost. The risk of the project defined with 3 scenarios to obtain NPV and calculate Expected Net Present Value (ENPV). The result of this study showed Real Options Valuation obtained the highest project value indicating a higher return of the project that was previously undervalued using NPV and ENPV. Real Options Valuation approach improved the project value by incorporating scenario analysis and strategic option in the valuation process.
Highlights
Renewable energy in Indonesia only 6.2% of the total energy mix in 2015 that indicating Renewable energy in Indonesia reached 6.2% of the total energy mix in 2015 that indicating Indonesia has a large dependence on fossil energy [1]
The uncertainties considered in this renewable energy project are discount rate, electric sales volume, and Operation and Maintenance (O&M) cost
The Net Present Value (NPV) sensitivity chart after Monte Carlo Simulation of Real Options Valuation (ROV) best scenario shows that the Unit-1 and Unit-2 project is sensitive to the discount rate variation
Summary
Renewable energy in Indonesia only 6.2% of the total energy mix in 2015 that indicating Renewable energy in Indonesia reached 6.2% of the total energy mix in 2015 that indicating Indonesia has a large dependence on fossil energy [1]. Indonesia has a great potential for renewable energy such as geothermal. Geothermal power generation is a promising substitute for the traditional-generating approaches like fossil energy [2]. Geothermal Power Plant that has been installed in Indonesia only 1640 MW about 4.9% of 29,544 MW total potential geothermal in Indonesia [1]. Geothermal power generation should be carefully evaluated, because the project is large-scale and highrisk, and huge investments are needed to make the project profitable
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