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Flexibility Options for Lignite-Fired Power Plants: A Real Options Approach

In: Operations Research Proceedings 2016

Author

Listed:
  • Barbara Glensk

    (Institute for Future Energy Consumer Needs and Behavior (FCN), E.ON Energy Research Center, RWTH Aachen University)

  • Reinhard Madlener

    (Institute for Future Energy Consumer Needs and Behavior (FCN), E.ON Energy Research Center, RWTH Aachen University)

Abstract

Germany’s energy system transformation process “Energiewende” implies, on the one hand, the promotion of renewable energy sources and, on the other hand, difficulties in the profitable operation of many modern conventional power plants due to increasing shares of renewable electricity and decreasing electricity wholesale prices. Nevertheless, the prioritized conventional power generation technologies are still needed in times of low wind and solar power generation in order to maintain the security of electricity supply. Regarding these aspects and the specific situation in the federal state of North Rhine-Westphalia, the problem of further operation of lignite-fired power plants is of particular importance. In the study undertaken we tackled the following research questions: Should lignite-fired power plants be operated without any changes until the end of their lifetime? Can already existing lignite-fired power plants be operated more flexibly? If so, which flexibility options should be taken into consideration? What is the optimal investment time for these flexibility options? Are investments in other power generation technologies more suitable for ensuring system stability than investing in the retrofitting of existing lignite-fired power plants is? To answer these questions, we propose an optimization model that is based on real options analysis (ROA) and, more precisely, on the option of choosing. In the proposed model, the economic as well as technical aspects of the power plant operation are taken into consideration for the profitability calculations. Moreover, the results show the importance of the subsidies for lignite-fired power plants and their further operation.

Suggested Citation

  • Barbara Glensk & Reinhard Madlener, 2018. "Flexibility Options for Lignite-Fired Power Plants: A Real Options Approach," Operations Research Proceedings, in: Andreas Fink & Armin Fügenschuh & Martin Josef Geiger (ed.), Operations Research Proceedings 2016, pages 157-163, Springer.
    • Handle: RePEc:spr:oprchp:978-3-319-55702-1_22
    DOI: 10.1007/978-3-319-55702-1_22
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    Cited by:

    1. Barbara Glensk & Reinhard Madlener, 2019. "Energiewende @ Risk: On the Continuation of Renewable Power Generation at the End of Public Policy Support," Energies, MDPI, vol. 12(19), pages 1-25, September.
    2. Biber, Albert & Wieland, Christoph & Spliethoff, Hartmut, 2022. "Economic analysis of energy storages integrated into combined-cycle power plants," Energy Policy, Elsevier, vol. 170(C).
    3. Glensk, Barbara & Madlener, Reinhard, 2019. "The value of enhanced flexibility of gas-fired power plants: A real options analysis," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    4. Barbara Glensk & Christiane Rosen & Reinhard Madlener, 2016. "A Real Options Model for the Disinvestment in Conventional Power Plants," Operations Research Proceedings, in: Marco Lübbecke & Arie Koster & Peter Letmathe & Reinhard Madlener & Britta Peis & Grit Walther (ed.), Operations Research Proceedings 2014, edition 1, pages 173-179, Springer.
    5. Dominik Kryzia & Michał Kopacz & Katarzyna Kryzia, 2020. "The Valuation of the Operational Flexibility of the Energy Investment Project Based on a Gas-Fired Power Plant," Energies, MDPI, vol. 13(7), pages 1-16, March.

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