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Author’s VersionCC BY-NC-ND V4.0, Open Access
Journal article
Climate policy uncertainty and power generation investments: A real options-CVaR portfolio optimization approach
Energy Procedia, Vol.75, pp.2649-2657
2015
Abstract
A decision support framework has been provided to assist investors with long-term decision-making for investment choices in power generation assets under uncertain climate policy. The model combines real options analysis and modern portfolio optimization theory. A long-term correlation between carbon and renewable portfolio standard certificate prices is used to model the interaction of climate policies, with a case study being developed to investigate the optimal choice of capacity additions to an existing mix of power generation assets in Australia. The findings show that there is potential for investors to fully hedge their existing fossil fuel based generation assets through the addition of on-shore wind capacity. The model developed allows for (1) the investigation of investment risk and return under uncertain climate policies, and (2) the study of interaction among green policies.
Details
- Title
- Climate policy uncertainty and power generation investments: A real options-CVaR portfolio optimization approach
- Authors/Creators
- M. Shahnazari (Author/Creator) - Murdoch UniversityB. Maybee (Author/Creator) - Curtin UniversityJ. Whale (Author/Creator) - Murdoch UniversityA. McHugh (Author/Creator) - Ernst & Young
- Publication Details
- Energy Procedia, Vol.75, pp.2649-2657
- Publisher
- Elsevier Ltd.
- Identifiers
- 991005542957707891
- Murdoch Affiliation
- School of Engineering and Information Technology
- Language
- English
- Resource Type
- Journal article
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