Real Options and Energy Management - Using Options Methodology to Enhance Capital Budgeting Decisions

  • ID: 220078
  • Book
  • 300 Pages
  • Incisive Media
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This multi-author title that focuses on both the fundamentals of real options, and the very latest practical approaches for their application in the energy industry.

- Designed to specifically aid valuation and investment decision-making within the energy industry
- Brings together the leading practitioners, consultants and academics from the energy sector who present the most up-to-date real option approaches and techniques, such as the diagrammatical approach, to help the industry move away from the current climate of uncertainty in the market
- Provides brand new case studies and examples of the use of real options in the industry to demonstrate how the latest techniques can be applied to power generation, fuel supply and demand issues, and strategic as well as environmental issues in the energy sector
- Additionally, includes the fundamentals of real option pricing and modelling, such as option valuation, modelling approaches, and optimisation
- Emphasises applications of theory to practical situations with worked examples that enable the reader to adopt them in their own projects
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Contents
Introduction
Ehud Ronn

Part I: Options From Options: Financial Options Meet Real Options
1 Risk-Neutral Stochastic Processes for Commodity Derivative Pricing: An Introduction and Survey
Duane J. Seppi
2 Options and Option Valuation Techniques
Steve Leppard
3 Diagrammatic Approach to Real Options
Steve Leppard and Fabio Cannizzo
4 Optimisation and Optimisation Techniques
Shannon Burchett and Deepankar Biswas
5 Applying Stochastic Dynamic Programming to the Valuation of Gas Storage and Generation Assets
Tom Weston
6 Derivative Modelling Approaches in Real Asset Valuation
Sailesh Ramamurtie, Aram Sogomonian, Adrian Dragulescu and Larry Li

Part II: Real Options And The Energy Industry: Applying Real Option Valuation To Power Generation And Ancillary Services
7 Operating and Risk Managing Power Plants
Alexander Eydeland and Krzysztof Wolyniec
8 Power Plant Operations and Real Options
Chung-Li Tseng and Graydon Barz
9 Valuing and Hedging Real Options
B. Sailesh Ramamurtie and Brian Bizzano
10 Peaking Plant Valuation: A Discounted Cashflow/Real Option Comparison
J.P. St. Germain and H. Brett Humphreys
11 Price Spikes and Real Options: Transmission Valuation
Michael Rosenberg, Joseph D. Bryngelson, Nikolai Sidorenko and Michael Baron
12 Price Interactions of Baseload Supply Changes and Electricity Demand Shocks
Robert Elliott, Gordon Sick and Michael Stein
13 Modelling Generation Assets
Blake Johnson and María Inés De Miranda

Part III: Primary Inputs: Gas And Oil
14 Valuation of the Operational Flexibility of Natural Gas Storage Reservoirs
Spyros Maragos
15 The Growth of Flexible Offshore Oil Fields
Larry Chorn and Shashidhar Rajagopalan
16 Valuing Proven Undeveloped Petroleum Reserves using Real Options
John McCormack, Gordon Sick and Dan Calistrate
17 Valuation of Petroleum Reserves with Quantity and Price Uncertainties: The Case of Woodside Energy
Stuart Connell

Part IV: Strategy And Environmental Issues In Electric Power
18 Real Options for Real Assets - A No Arbitrage Approach
Chris Harris
19 Schemes of Emissions Management, Bottom up Approaches to Internalising the Cost of Sulphur Dioxide Emissions
Shannon Burchett and Deepankar Biswas

Part V: Case Studies
20 Valuing Generation Assets Using Real Option Competitive Price Analysis: A Step-by-Step Valuation Example for a Portfolio of Generation Assets
Frank S. Li and Wang Chiu
21 Analytical Valuation of a Full Requirements Contract as a Real Option by the Method of Eigenclaims
Valery A. Kholodnyi

Appendix

Probability and Stochastic Calculus: Review of Probability Concepts
Michael Rosenberg, Joseph D. Bryngelson and Michael Baron

An Efficient and Accurate Computational Technique for Dynamic Programming with Markov Processes
Alexander Eydeland and Daniel Mahoney

Index
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