scholarly journals A New Look at the Economic Evaluation of Wind Energy as an Alternative to Electric and Natural Gas-Powered Irrigation

2013 ◽  
Vol 45 (4) ◽  
pp. 739-751 ◽  
Author(s):  
Dmitry Lima ◽  
Gregory Colson ◽  
Berna Karali ◽  
Bridget Guerrero ◽  
Stephen Amosson ◽  
...  
Keyword(s):  
Economic Evaluation ◽  
Natural Gas ◽  
Wind Energy ◽  
Real Options ◽  
Net Present Value ◽  
Present Value ◽  
Irrigation Systems ◽  
Investment Timing ◽  
Stochastic Nature ◽  
Replacement Decisions

An extension of the Guerrero et al. (2010) net present value (NPV) analysis using real options analysis (ROA) is offered to improve machinery replacement decisions. Specifically, the feasibilities of replacing natural gas irrigation systems with either electric or hybrid (electric/wind) systems are evaluated. Results indicate NPV and ROA criteria can yield opposite decisions depending on the stochastic nature of the parameters, reversibility of the investment, and flexibility of investment timing. For policy, NPV results indicate that replacing natural gas with a hybrid is on the cusp of being optimal. However, ROA indicates this NPV implication may not hold.

scholarly journals Valuing a natural gas pipeline expansion project: A copula-TGARCH application in Mexico

2018 ◽  
Vol 64 (2) ◽  
pp. 95
Author(s):  
Ricardo Massa Roldan ◽  
Montserrat Reyna Miranda
Keyword(s):  
Natural Gas ◽  
Real Options ◽  
Net Present Value ◽  
Joint Effect ◽  
Gas Pipeline ◽  
Energy Prices ◽  
Present Value ◽  
The Real ◽  
Investment Projects ◽  
The Individual

<p>With the liberalization of energy prices and the opening of the energy sector to competitors in Mexico, an opportunity for new investment projects is now open. Due to the current conditions of international energy markets, such as volatility and low prices with no prospect of reversion, a need for valuation tools to better capture the risk and benefits of a project presents itself. We propose a methodology based on the volatility treatment of numerous underlying assets in a Real Options Analysis: using a TGARCH for the individual volatilities and copulas for the joint effect. The methodology is applied to a natural gas distribution project of Mexico’s State oil company Petróleos Mexicanos (PEMEX). An estimated net present value of the gas pipeline is provided, considering the real options perspective. The result of our empirical application validates the real option’s theory of a higher net present value estimation for the project when incorporating the effect of different sources of uncertainty and non-linear interdependence.</p>

scholarly journals Green electricity investment timing in practice: Real options or net present value?

Energy ◽  
2016 ◽  
Vol 116 ◽  
pp. 498-506 ◽  
Author(s):  
Stein-Erik Fleten ◽  
Kristin Linnerud ◽  
Peter Molnár ◽  
Maria Tandberg Nygaard
Keyword(s):  
Real Options ◽  
Net Present Value ◽  
Present Value ◽  
Green Electricity ◽  
Investment Timing

scholarly journals Ethanol plant investment using net present value and real options analyses

2009 ◽  
Vol 33 (10) ◽  
pp. 1442-1451 ◽  
Author(s):  
Todd M. Schmit ◽  
Jianchuan Luo ◽  
Loren W. Tauer
Keyword(s):  
Real Options ◽  
Net Present Value ◽  
Present Value ◽  
Ethanol Plant

scholarly journals Gas to Liquids Techno-Economics of Associated Natural Gas, Bio Gas, and Landfill Gas

Processes ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 1568
Author(s):  
Federico Galli ◽  
Jun-Jie Lai ◽  
Jacopo De Tommaso ◽  
Gianluca Pauletto ◽  
Gregory S. Patience
Keyword(s):  
Natural Gas ◽  
Net Present Value ◽  
Landfill Gas ◽  
Labor Cost ◽  
Variable Cost ◽  
Selling Price ◽  
Present Value ◽  
Fischer Tropsch ◽  
Gas To Liquids ◽  
The Impact

Methane is the second highest contributor to the greenhouse effect. Its global warming potential is 37 times that of CO2. Flaring-associated natural gas from remote oil reservoirs is currently the only economical alternative. Gas-to-liquid (GtL) technologies first convert natural gas into syngas, then it into liquids such as methanol, Fischer–Tropsch fuels or dimethyl ether. However, studies on the influence of feedstock composition are sparse, which also poses technical design challenges. Here, we examine the techno-economic analysis of a micro-refinery unit (MRU) that partially oxidizes methane-rich feedstocks and polymerizes the syngas formed via Fischer–Tropsch reaction. We consider three methane-containing waste gases: natural gas, biogas, and landfill gas. The FT fuel selling price is critical for the economy of the unit. A Monte Carlo simulation assesses the influence of the composition on the final product quantity as well as on the capital and operative expenses. The Aspen Plus simulation and Python calculate the net present value and payback time of the MRU for different price scenarios. The CO2 content in biogas and landfill gas limit the CO/H2 ratio to 1.3 and 0.9, respectively, which increases the olefins content of the final product. Compressors are the main source of capital cost while the labor cost represents 20–25% of the variable cost. An analysis of the impact of the plant dimension demonstrated that the higher number represents a favorable business model for this unit. A minimal production of 7,300,000 kg y−1 is required for MRU to have a positive net present value after 10 years when natural gas is the feedstock.

Business valuation strategy for new hydroponic farm development – a proposal towards sustainable agriculture development in United Arab Emirates

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Gyanendra Singh Sisodia ◽  
Raweya Alshamsi ◽  
Bruno S. Sergi
Keyword(s):  
Food Security ◽  
Real Options ◽  
United Arab Emirates ◽  
Net Present Value ◽  
Good Health ◽  
Social Implications ◽  
Present Value ◽  
Content Type ◽  
Real Options Approach ◽  
Fresh Vegetables

PurposeThis study aims to evaluate a hydroponic farm (through nutrient film technique) while considering uncertainty, sustainability and the system's utility in the dominant desert geography. The idea of the hydroponic farm is to allow individuals/businesses to grow plants. Given the geographical condition, the hydroponic system may be useful in the Gulf context and may lead to food security and sustainability. Additionally, the UAE government has initiated several support schemes that can be availed for investing in such businesses that can contribute to the nation's food security.Design/methodology/approachThe hydroponic farm is evaluated using the net present value and real options approach. The authors studied five scenarios: 1. business as usual, 2. 50% subsidy on initial investment through Khalifa funding, 3. 4% premium, 4. Subsidy plus premium and 5. solar panel installation with bore well.FindingsAs per the assumptions and data usage, all the scenarios shows a positive net present value (NPV); Nevertheless, scenarios 4 and 5 report the significant highest net present and delay value.Research limitations/implicationsThis study has environmental, economic and social implications. Lower imports indirectly lead to lower carbon footprints. The local production of food ensures higher employability in the sector and increase in local consumption. Additionally, fresh food consumption is directly associated to good health.Practical implicationsSupportive policies such as subsidies through Khalifa funding may accelerate the expansion of such projects through domestic and foreign investments. One of the important takeaway from the study is to invest in the training of the workforce.Social implicationsGiven the geographical condition, the UAE usually depends on food imports. If the hydroponic farms become popular, the residents will have access to fresh vegetables and fruits. Higher engagement in agriculture activities also ensures a significant increase in agriculture-related businesses and higher employability.Originality/valueThe study adds novelty to the literature because the effect of Khalifa funding and investment analysis on solar (wells) has not been evaluated in any hydroponic studies. We presented the results with tornado graphs using NPV risk and real options approach in the Gulf context. The study represents functional scenarios that were previously not found in the literature.

Maintenance Decisions for Offshore Structures Using Real Options Theory

2004 ◽  
Author(s):  
Ernesto Heredia-Zavoni ◽  
Sandra Santa-Cruz
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Cash Flow ◽  
Net Present Value ◽  
Offshore Structures ◽  
Present Value ◽  
Real Options Theory ◽  
Financial Variables ◽  
Maintenance Decisions ◽  
Options Theory

Real Options methods are currently used to assess investment projects considering: (1) the decision options that one can have along the development of the project, such as to expand it, or reduce it, or to abandon it, or to differ it, and (2) the uncertainty in some financial variables for the assessment of the economic investment. In these two regards, Real Options methods are superior to the traditional Net Present Value method. The purpose of the present paper is to establish the basis for Real Options modeling for decision making on design, inspection, maintenance, and decommissioning of offshore structures. The use of Real Options theory is sought in order to account for: (1) uncertainties in the financial variables involved in risk assessment based on expected costs, such as the economic consequences due to failure of a system; and (2) uncertainties associated with the resistance and loading of the structure for reliability assessment. An application of Real Options Theory is given in the paper for decision making on maintenance for an offshore structure. Cash flow from oil revenue is modeled as a stochastic process. Preventive and corrective maintenance is analyzed as a critical situation where the decision maker has the option to pay the costs of maintenance in order to obtain a benefit. Expressions are derived for the estimation of the value of the maintenance option; they are based on the derivation of the Black-Scholes equation for the evaluation of financial options. It is shown that the value of such project is equal to the sum of the net cash flow of the project (as with a Net Present Value evaluation) plus the value of the maintenance option. Projects with one and two decision times along the life of the structure are formulated and analyzed. Closed form solutions are obtained for such cases. An example is given in order to illustrate the differences between maintenance decisions using the Net Present Value and the Real Options method.

scholarly journals A Real Options Approach to Valuate Solar Energy Investment with Public Authority Incentives: The Italian Case

Energies ◽  
2020 ◽  
Vol 13 (16) ◽  
pp. 4181
Author(s):  
Antonio Di Bari
Keyword(s):  
Solar Energy ◽  
Real Options ◽  
Real Option ◽  
Net Present Value ◽  
Option Value ◽  
Present Value ◽  
Energy Investment ◽  
The Real ◽  
Real Options Approach ◽  
Real Option Value

Solar energy investment represents currently a valid reason to support sustainable economic development. In fact, over the last few years, governments have applied different measures to incentivize private consumers and firms to use renewable energies. Photovoltaic (PV) projects are characterized by uncertainty due to meteorological conditions, the unpredictable behavior of government, and managerial flexibility. Since the Net Present Value (NPV) approach is not able to capture these uncertain factors, it was replaced with the Real Options Approach (ROA). The latter method manages to embed flexibility in PV investment using binomial trees. This paper valuates PV investment in all regional areas in Italy using an integrated approach between the discounted cash flows method and real option value, called Expanded Net Present Value (ENPV). We fit the probability of tax benefits into a binomial lattice model after analyzing the geographical position and weather conditions of all regional capitals of Italy. The results show that the cities with high irradiance/temperature have positive NPV and high investment values. On the other hand, while most cities have negative NPV, the inclusion of the flexibility in investment decisions gives additional value to the project, making the ENPV positive and implying an attractive investment opportunity with the possibility of delaying the project. We also propose a sensitivity analysis that shows how the real option value changes when incentive policies of the government become more attractive. This paper contributes to the existing literature in the way of considering financial, meteorological/geographical, and political factors to valuate PV investment.

Economic Analysis of Distributed Generation Options With Wide Turndown

2009 ◽  
Author(s):  
Winston S. Burbank ◽  
Dennis E. Witmer ◽  
Frank Holcomb
Keyword(s):  
Natural Gas ◽  
Distributed Generation ◽  
Peak Power ◽  
Net Present Value ◽  
Carbon Tax ◽  
Present Value ◽  
Historical Cost ◽  
Capital Costs ◽  
Internally Cooled ◽  
Base Load

Solid oxide fuel cell gas turbine (SOFCGT) hybrid systems have received much attention due to high predicted efficiencies, low emissions and low historical cost of natural gas. For market acceptance three criteria must be met: reliability, commercial availability and a positive net present value. This study deals primarily with the latter, comparing the net present value of the following four engines operating under a distributed or isolated loads: a simple cycle microturbine, a novel internally-cooled and recuperated (ICR) microturbine, a novel SOFCGT hybrid supported by the same ICR microturbine, and a standard diesel engine. Due to the higher value of peak power, a system able to meet fluctuating power demands while retaining high efficiencies is strongly preferable to base load operation. Sensitivity analysis is made for variable prices of natural gas, electric rates, carbon tax, and SOFC capital costs.

Sign in / Sign up

Export Citation Format

Share Document