On the evaluation of infrastructure investments: the case of electricity generation
AbstractWe derive general equilibrium cost-benefit rules for investment in a small power plant that needs (or does not need) carbon emission permits for production. Both atemporal and intertemporal models are considered, the latter showing e. g. that there exists a kind of option value also under certainty. Finally we introduce uncertainty by briefly discussing the concepts of quasi-option and option values and a switching possibility that is available for flexible power plants like hydropower ones which can easily be turned on and turned off.
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Bibliographic InfoPaper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2009-24.
Date of creation: 07 Oct 2009
Date of revision:
Cost-benefit analysis; externalities; switching models;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
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