IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_2729.html

Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix

Author

Listed:
  • Luca Di Corato
  • Michele Moretto

Abstract

In 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.

Suggested Citation

  • Luca Di Corato & Michele Moretto, 2009. "Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix," CESifo Working Paper Series 2729, CESifo.
    • Handle: RePEc:ces:ceswps:_2729
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp2729.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Bertolini, Marina & D’Alpaos, Chiara & Moretto, Michele, "undated". "Investing in Photovoltaics: Timing, Plant Sizing and Smart Grids Flexibility," MITP: Mitigation, Innovation and Transformation Pathways 244540, Fondazione Eni Enrico Mattei (FEEM).
    2. Di Corato, Luca & Montinari, Natalia, 2014. "Flexible waste management under uncertainty," European Journal of Operational Research, Elsevier, vol. 234(1), pages 174-185.
    3. Kuangyuan Zhang & Richard Olawoyin & Antonio Nieto & Andrew N. Kleit, 2018. "Risk of commodity price, production cost and time to build in resource economics," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 20(6), pages 2521-2544, December.
    4. Carrosio, Giovanni, 2013. "Energy production from biogas in the Italian countryside: Policies and organizational models," Energy Policy, Elsevier, vol. 63(C), pages 3-9.
    5. Andreas Welling, 2017. "Green Finance: Recent developments, characteristics and important actors," FEMM Working Papers 170002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    6. Fabio Bartolini & Luciana G. Angelini & Gianluca Brunori & Oriana Gava, 2015. "Impacts of the CAP 2014–2020 on the Agroenergy Sector in Tuscany, Italy," Energies, MDPI, vol. 8(2), pages 1-22, February.
    7. Ye Li & Clemens Kool & Peter-Jan Engelen, 2020. "Analyzing the Business Case for Hydrogen-Fuel Infrastructure Investments with Endogenous Demand in The Netherlands: A Real Options Approach," Sustainability, MDPI, vol. 12(13), pages 1-22, July.
    8. Dimitrios Zormpas & Giorgia Oggioni, 2024. "Correction to: Evaluating the optimal timing and capacity of investments in flexible combined heat and power generation for energy-intensive industries," Annals of Operations Research, Springer, vol. 332(1), pages 1161-1161, January.
    9. Yu‐Fu Chen & Michael Funke, 2010. "Booms, Recessions And Financial Turmoil: A Fresh Look At Investment Decisions Under Cyclical Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(3), pages 290-317, July.
    10. Ayman Awad & Hussein Abdel-Mawgoud & Salah Kamel & Abdalla A. Ibrahim & Francisco Jurado, 2021. "Developing a Hybrid Optimization Algorithm for Optimal Allocation of Renewable DGs in Distribution Network," Clean Technol., MDPI, vol. 3(2), pages 1-15, May.
    11. Bertolini, Marina & D'Alpaos, Chiara & Moretto, Michele, 2018. "Do Smart Grids boost investments in domestic PV plants? Evidence from the Italian electricity market," Energy, Elsevier, vol. 149(C), pages 890-902.
    12. 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.
    13. Anna Carozzani & Chiara D’Alpaos, 2025. "The Real Option Approach to Investment Decisions in Hybrid Renewable Energy Systems: A Systematic Literature Review," Energies, MDPI, vol. 18(20), pages 1-35, October.
    14. Kozlova, Mariia, 2017. "Real option valuation in renewable energy literature: Research focus, trends and design," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 180-196.
    15. Balibrea-Iniesta, José & Rodríguez-Monroy, Carlos & Núñez-Guerrero, Yilsy María, 2021. "Economic analysis of the German regulation for electrical generation projects from biogas applying the theory of real options," Energy, Elsevier, vol. 231(C).
    16. Briest, Gordon & Lauven, Lars-Peter & Kupfer, Stefan & Lukas, Elmar, 2022. "Leaving well-worn paths: Reversal of the investment-uncertainty relationship and flexible biogas plant operation," European Journal of Operational Research, Elsevier, vol. 300(3), pages 1162-1176.
    17. Wittmann, Nadine & Yildiz, Özgür, 2013. "A microeconomic analysis of decentralized small scale biomass based CHP plants—The case of Germany," Energy Policy, Elsevier, vol. 63(C), pages 123-129.
    18. Alessio Trivella & Selvaprabu Nadarajah & Stein-Erik Fleten & Denis Mazieres & David Pisinger, 2021. "Managing Shutdown Decisions in Merchant Commodity and Energy Production: A Social Commerce Perspective," Manufacturing & Service Operations Management, INFORMS, vol. 23(2), pages 311-330, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2729. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.