Published September 2010 | Version v1
Journal article

Renewable energy policy evaluation using real option model. The case of Taiwan

  • 1. Department of Resources Engineering, National Cheng Kung University, Tainan (China)

Description

This study presents a policy benefit evaluation model that integrates cost efficiency curve information on renewable power generation technologies into real options analysis (ROA) methods. The proposed model evaluates quantitatively the policy value provided by developing renewable energy (RE) in the face of uncertain fossil fuel prices and RE policy-related factors. The economic intuition underlying the policy-making process is elucidated, while empirical analysis illustrates the option value embedded in the current development policy in Taiwan for wind power. In addition to revealing the benefits that RE development provides when considering real options, analytical results indicate that ROA is a highly effective means of quantifying how policy planning uncertainty including managerial flexibility influences RE development. In addition to assessing the policy value of current RE development policy, this study also compares policy values in terms of internalized external costs and varying feed-in tariff (FIT). Simulation results demonstrate that the RE development policy with internalized CO2 emission costs is appropriate policy planning from sustainability point of view. Furthermore, relationship between varying FIT and policy values can be shown quantitatively and appropriate FIT level could be determined accordingly. (author)

Availability note (English)

Available from Available from: http://dx.doi.org/10.1016/j.eneco.2010.04.010

Additional details

Identifiers

Publishing Information

Journal Title
Energy Economics
Journal Volume
32
Journal Issue
Suppl.1
Journal Page Range
p. S67-S78
ISSN
0140-9883
CODEN
EECODR

Optional Information

Notes
Elsevier Ltd. All rights reserved; Special issue on Asian energy in the context of growing security and environmental concerns