Real Options Analysis of Renewable Energy Investment Scenarios in the Philippines

Agaton, Casper (2017): Real Options Analysis of Renewable Energy Investment Scenarios in the Philippines. Published in: Renewable Energy and Sustainable Development , Vol. 3, No. 3 (30 December 2017): pp. 284-292.

Abstract

With the continuously rising energy demand and much dependence on imported fossil fuels, the Philippines is developing more sustainable sources of energy. Renewable energy seems to be a better alternative solution to meet the country’s energy supply and security concerns. Despite its huge potential, investment in renewable energy sources is challenged with competitive prices of fossil fuels, high start-up cost for renewables, and lower feed-in-tariff rates for renewables. To address these problems, this study aims to analyze energy investment scenarios in the Philippines using real options approach. This compares the attractiveness of investing in renewable energy over continue using coal for electricity generation under uncertainties in coal prices, investments cost, electricity prices, growth of investment in renewables, and imposing carbon tax for using fossil fuels.

• Item Type: MPRA Paper
• Language: English
• Keywords: real options approach; investment under uncertainty; dynamic optimization; renewable energy
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting

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