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    Climate policy uncertainty and power generation investments: A real options-CVaR portfolio optimization approach

    228649_163238_Energy_Procedia.pdf (1.051Mb)
    Access Status
    Open access
    Authors
    ShahNazari, M.
    Maybee, Bryan
    Whale, J.
    McHugh, A.
    Date
    2015
    Type
    Conference Paper
    
    Metadata
    Show full item record
    Citation
    ShahNazari, M. and Maybee, B. and Whale, J. and McHugh, A. 2015. Climate policy uncertainty and power generation investments: A real options-CVaR portfolio optimization approach, in 7th International Conference on Applied Energy – ICAE2015, Mar 28 2015, pp. 2649-2657. Abu Dhabi, United Arab Emirates: Elsevier.
    Source Title
    The 7th International Conference on Applied Energy – ICAE2015
    Source Conference
    The 7th International Conference on Applied Energy – ICAE2015
    DOI
    10.1016/j.egypro.2015.07.367
    School
    Curtin Graduate School of Business
    Remarks

    This open access article is distributed under the Creative Commons license http://creativecommons.org/licenses/by-nc-nd/4.0/

    URI
    http://hdl.handle.net/20.500.11937/20902
    Collection
    • Curtin Research Publications
    Abstract

    A decision support framework has been provided to assist investors with long-term decision-making for investment choices in power generation assets under uncertain climate policy. The model combines real options analysis and modern portfolio optimization theory. A long-term correlation between carbon and renewable portfolio standard certificate prices is used to model the interaction of climate policies, with a case study being developed to investigate the optimal choice of capacity additions to an existing mix of power generation assets in Australia. The findings show that there is potential for investors to fully hedge their existing fossil fuel based generation assets through the addition of on-shore wind capacity. The model developed allows for (1) the investigation of investment risk and return under uncertain climate policies, and (2) the study of interaction among green policies.

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