Fortin, Ines Fuss, Sabine Hlouskova, Jaroslava Khabarov, Nikolay Obersteiner, Michael Szolgayova, Jana
Year of Publication:
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 209
The objective of this paper is to combine a real options framework with portfolio optimization techniques and to apply this new framework to investments in the electricity sector. In particular, a real options model is used to assess the adoption decision of particular technologies under uncertainty. These technologies are coal-fired power plants, biomassfired power plants and onshore wind mills, and they are representative of technologies based on fossil fuels, biomass and renewables, respectively. The return distributions resulting from this analysis are then used as an input to a portfolio optimization, where the measure of risk is the Conditional Value-at-Risk (CVaR).