Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix
AbstractIn a continuous-time framework we study the technology and investment choice problem of a continuous co-digestion biogas plant dealing with randomly fluctuating relative convenience of input factor costs. Input factors enter into the productive process together mixed according to a given initial rule. Being inputs relative convenience stochastically evolving, a successive revision of the initial rule may be desirable. Hence, when the venture starts the manager may or may not install a flexible technology allowing for such option. Investment is irreversible and flexibility is costly. The problem is solved determining in the light of future prospects the optimal revision and then playing backward fixing the investment timing rule.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2729.
Date of creation: 2009
Date of revision:
factor proportions; technological choice; flexibility; real options; alternative energy source;
Other versions of this item:
- Di Corato, Luca & Moretto, Michele, 2011. "Investing in biogas: Timing, technological choice and the value of flexibility from input mix," Energy Economics, Elsevier, vol. 33(6), pages 1186-1193.
- Michele Moretto & Luca Di Corato, 2009. "Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix," Working Papers 2009.84, Fondazione Eni Enrico Mattei.
- Luca Di Corato & Michele Moretto, 2011. "Investing in biogas: timing, technological choice and the value of flexibility from inputs mix," "Marco Fanno" Working Papers 0134, Dipartimento di Scienze Economiche "Marco Fanno".
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
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