Advanced Search
MyIDEAS: Login

A Real Options Approach to Evaluating New Nuclear Power Plants

Contents:

Author Info

  • Geoffrey Rothwell

Abstract

Although nuclear power plants are being built in Asia, they have not been ordered in the U.S. since the 1979 accident at Three Mile Island. For many reasons, new attention is being given to light water reactors. Currently- operating nuclear power plants in the U.S. were built under rate-of-return regulation. Now, new nuclear power plants must compete in power markets. This paper models the net present value of building an Advanced Boiling Water Reactor in Texas using a real options approach to determine the risk premium associated with net revenue uncertainty. It finds that a cost of about $1,200 per kilowatt-electric (including financing costs) for advanced light water nuclear power plants could trigger new orders. On the other hand, owner-operators might be willing to pay higher prices for nuclear megawatts if methods for mitigating price, cost, and capacity risk through contracts or real assets could be found.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=2115
Download Restriction: Access to full text is restricted to IAEE members and subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 27 (2006)
Issue (Month): Number 1 ()
Pages: 87-54

as in new window
Handle: RePEc:aen:journl:2006v27-01-a02

Contact details of provider:
Postal: 28790 Chagrin Blvd Ste 350, Cleveland, OH 44122, USA
Phone: 216-464-5365
Fax: 216-464-2737
Email:
Web page: http://www.iaee.org
More information through EDIRC

Order Information:
Web: http://www.iaee.org/en/publications/ejsearch.aspx

Related research

Keywords:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Blyth, William & Bunn, Derek & Kettunen, Janne & Wilson, Tom, 2009. "Policy interactions, risk and price formation in carbon markets," Energy Policy, Elsevier, vol. 37(12), pages 5192-5207, December.
  2. Yang, Ming & Nguyen, François & De T'Serclaes, Philippine & Buchner, Barbara, 2010. "Wind farm investment risks under uncertain CDM benefit in China," Energy Policy, Elsevier, vol. 38(3), pages 1436-1447, March.
  3. Botterud, Audun & Yildiz, Bilge & Conzelmann, Guenter & Petri, Mark C., 2008. "Nuclear hydrogen: An assessment of product flexibility and market viability," Energy Policy, Elsevier, vol. 36(10), pages 3961-3973, October.
  4. John Foster & Liam Wagner & Phil Wild & Junhua Zhao & Lucas Skoofa & Craig Froome, 2011. "Market and Economic Modelling of the Intelligent Grid: End of Year Report 2009," Energy Economics and Management Group Working Papers 09, School of Economics, University of Queensland, Australia.
  5. Kessides, Ioannis N., 2010. "Nuclear power: Understanding the economic risks and uncertainties," Energy Policy, Elsevier, vol. 38(8), pages 3849-3864, August.
  6. Roques, Fabien A., 2008. "Technology choices for new entrants in liberalized markets: The value of operating flexibility and contractual arrangements," Utilities Policy, Elsevier, vol. 16(4), pages 245-253, December.
  7. Lee, Shun-Chung, 2011. "Using real option analysis for highly uncertain technology investments: The case of wind energy technology," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4443-4450.
  8. Siddiqui, Afzal S. & Marnay, Chris & Wiser, Ryan H., 2007. "Real options valuation of US federal renewable energy research, development, demonstration, and deployment," Energy Policy, Elsevier, vol. 35(1), pages 265-279, January.
  9. Westner, Günther & Madlener, Reinhard, 2012. "Investment in new power generation under uncertainty: Benefits of CHP vs. condensing plants in a copula-based analysis," Energy Economics, Elsevier, vol. 34(1), pages 31-44.
  10. Daniel Ziegler & Katrin Schmitz & Christoph Weber, 2012. "Optimal electricity generation portfolios," Computational Management Science, Springer, vol. 9(3), pages 381-399, August.
  11. Spencer, Thomas & Marcey, Celine & Colombier, Michel & Guerin, Emmanuel, 2011. "Decarbonizing the EU power sector: policy approaches in the light of current trends and long-term trajectories," MPRA Paper 35009, University Library of Munich, Germany.
  12. Siddiqui, Afzal & Fleten, Stein-Erik, 2008. "How to Proceed with Competing Alternative Energy Technologies: a Real Options Analysis," MPRA Paper 15502, University Library of Munich, Germany, revised 04 May 2009.
  13. Yang, Ming & Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom, 2008. "Evaluating the power investment options with uncertainty in climate policy," Energy Economics, Elsevier, vol. 30(4), pages 1933-1950, July.
  14. Geoffrey Rothwell, 2010. "New U.S. Nuclear Generation: 2010-2030," Discussion Papers 09-025, Stanford Institute for Economic Policy Research.
  15. Heinzel, Christoph, 2008. "Implications of diverging social and private discount rates for investments in the German power industry: a new case for nuclear energy?," Dresden Discussion Paper Series in Economics 03/08, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  16. Adela Conchado & Pedro Linares, 2010. "The Economics of New Nuclear Power Plants in Liberalized Electricity Markets," Working Papers 04-2010, Economics for Energy.
  17. Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom & Yang, Ming, 2007. "Investment risks under uncertain climate change policy," Energy Policy, Elsevier, vol. 35(11), pages 5766-5773, November.
  18. Koomey, Jonathan & Hultman, Nathan E., 2007. "A reactor-level analysis of busbar costs for US nuclear plants, 1970-2005," Energy Policy, Elsevier, vol. 35(11), pages 5630-5642, November.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aen:journl:2006v27-01-a02. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.