Income risk of EU coal-fired power plants after Kyoto
Coal-fired power plants enjoy a significant advantage relative to gas plants in terms of cheaper fuel cost. This advantage may erode (or turn into disadvantage) depending on CO2 emission allowance price. Financial risks are further reinforced when the price of electricity is determined by natural gas-fired plants' marginal costs. We aim to empirically assess the risks in EU coal plants' margins up to the year 2020. Parameter values are derived from actual market data. Monte Carlo simulation allows compute the expected value and risk profile of coal plants' earnings. Future allowance prices may spell significant risks on utilities' balance sheets.
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.
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.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laurikka, Harri & Koljonen, Tiina, 2006. "Emissions trading and investment decisions in the power sector--a case study in Finland," Energy Policy, Elsevier, vol. 34(9), pages 1063-1074, June.
- Laurikka, Harri, 2006. "Option value of gasification technology within an emissions trading scheme," Energy Policy, Elsevier, vol. 34(18), pages 3916-3928, December.
- Nasakkala, Erkka & Fleten, Stein-Erik, 2005.
"Flexibility and technology choice in gas fired power plant investments,"
Review of Financial Economics,
Elsevier, vol. 14(3-4), pages 371-393.
- Erkka Näsäkkälä & Stein- Erik Fleten, 2004. "Flexibility and Technology Choice in Gas Fired Power Plant Investments," Others 0405004, EconWPA, revised 06 Apr 2006.
- Abadie, Luis M. & Chamorro, José M., 2008. "European CO2 prices and carbon capture investments," Energy Economics, Elsevier, vol. 30(6), pages 2992-3015, November.
- Roques, Fabien A. & Newbery, David M. & Nuttall, William J., 2008. "Fuel mix diversification incentives in liberalized electricity markets: A Mean-Variance Portfolio theory approach," Energy Economics, Elsevier, vol. 30(4), pages 1831-1849, July.
- Alberola, Emilie & Chevallier, Julien & Cheze, Benoi^t, 2008. "Price drivers and structural breaks in European carbon prices 2005-2007," Energy Policy, Elsevier, vol. 36(2), pages 787-797, February.
- Margaret Insley, 2002.
"On the option to invest in pollution control under a regime of tradable emissions allowances,"
02008, University of Waterloo, Department of Economics, revised Jan 2002.
- Margaret Insley, 2003. "On the option to invest in pollution control under a regime of tradable emissions allowances," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 860-883, November.
- Sødal, Sigbjørn & Koekebakker, Steen & Aadland, Roar, 2008. "Market switching in shipping -- A real option model applied to the valuation of combination carriers," Review of Financial Economics, Elsevier, vol. 17(3), pages 183-203, August.
- Hlouskova, Jaroslava & Kossmeier, Stephan & Obersteiner, Michael & Schnabl, Alexander, 2005. "Real options and the value of generation capacity in the German electricity market," Review of Financial Economics, Elsevier, vol. 14(3-4), pages 297-310.
- Julia Popova & Stratford Douglas, 2006.
"Storage and the Electricity Forward Premium,"
06-16 Classification-, Department of Economics, West Virginia University.
- Barbose, Galen & Wiser, Ryan & Phadke, Amol & Goldman, Charles, 2008. "Managing carbon regulatory risk in utility resource planning: Current practices in the Western United States," Energy Policy, Elsevier, vol. 36(9), pages 3300-3311, September.
When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:37:y:2009:i:12:p:5304-5316. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.