Determining the Sustainability of a Community Micro Hydro Power System using Real Options Analysis

Isidro Antonio V. Marfori, Alvin B. Culaba, Aristotle T. Ubando, Ray Anthony Almonares, Wei Hsin Chen

研究成果: Conference article

摘要

Micro hydro power is a clean source of renewable energy that has been utilized for remote communities for electricity generation. The technology is mature and operates the same principle as large hydroelectric power plant but with much lower power capacity. Sustainability relies on the financial and other benefits brought about the micro hydro power plant during its operation. Traditional valuation method is often used to valuate micro hydro projects however it does not incorporate uncertainty factors, specifically unpredictable changes in weather. Real Options Analysis, on the other hand, uses both the Black-Scholes Model and Binomial Tree Method which incorporates uncertainty. The valuation obtained through real option analysis represents the net present value of the project with decision flexibility option for the investor. In this study, real options analysis is applied to a micro hydro power plant to identify its financial sustainability. Head and flow rate are obtained to calculate the capital investment, electrical sales, maintenance, and cost of operating nearby agricultural facilities. Traditional financial valuation method revealed a positive outcome making the project financially viable. However, real options analysis provided a contradicting result indicating the implementation of the project should be delayed.

原文English
文章編號012108
期刊IOP Conference Series: Earth and Environmental Science
268
發行號1
DOIs
出版狀態Published - 2019 七月 2
事件International Conference on Sustainable Energy and Green Technology 2018, SEGT 2018 - Kuala Lumpur, Malaysia
持續時間: 2018 十二月 112018 十二月 14

指紋

valuation
sustainability
power plant
hydroelectric power plant
electricity generation
weather
analysis
project
cost
energy
method

All Science Journal Classification (ASJC) codes

  • Environmental Science(all)
  • Earth and Planetary Sciences(all)

引用此文

@article{fecb247f259040c58bedf61bb2be730e,
title = "Determining the Sustainability of a Community Micro Hydro Power System using Real Options Analysis",
abstract = "Micro hydro power is a clean source of renewable energy that has been utilized for remote communities for electricity generation. The technology is mature and operates the same principle as large hydroelectric power plant but with much lower power capacity. Sustainability relies on the financial and other benefits brought about the micro hydro power plant during its operation. Traditional valuation method is often used to valuate micro hydro projects however it does not incorporate uncertainty factors, specifically unpredictable changes in weather. Real Options Analysis, on the other hand, uses both the Black-Scholes Model and Binomial Tree Method which incorporates uncertainty. The valuation obtained through real option analysis represents the net present value of the project with decision flexibility option for the investor. In this study, real options analysis is applied to a micro hydro power plant to identify its financial sustainability. Head and flow rate are obtained to calculate the capital investment, electrical sales, maintenance, and cost of operating nearby agricultural facilities. Traditional financial valuation method revealed a positive outcome making the project financially viable. However, real options analysis provided a contradicting result indicating the implementation of the project should be delayed.",
author = "Marfori, {Isidro Antonio V.} and Culaba, {Alvin B.} and Ubando, {Aristotle T.} and Almonares, {Ray Anthony} and Chen, {Wei Hsin}",
year = "2019",
month = "7",
day = "2",
doi = "10.1088/1755-1315/268/1/012108",
language = "English",
volume = "268",
journal = "IOP Conference Series: Earth and Environmental Science",
issn = "1755-1307",
publisher = "IOP Publishing Ltd.",
number = "1",

}

Determining the Sustainability of a Community Micro Hydro Power System using Real Options Analysis. / Marfori, Isidro Antonio V.; Culaba, Alvin B.; Ubando, Aristotle T.; Almonares, Ray Anthony; Chen, Wei Hsin.

於: IOP Conference Series: Earth and Environmental Science, 卷 268, 編號 1, 012108, 02.07.2019.

研究成果: Conference article

TY - JOUR

T1 - Determining the Sustainability of a Community Micro Hydro Power System using Real Options Analysis

AU - Marfori, Isidro Antonio V.

AU - Culaba, Alvin B.

AU - Ubando, Aristotle T.

AU - Almonares, Ray Anthony

AU - Chen, Wei Hsin

PY - 2019/7/2

Y1 - 2019/7/2

N2 - Micro hydro power is a clean source of renewable energy that has been utilized for remote communities for electricity generation. The technology is mature and operates the same principle as large hydroelectric power plant but with much lower power capacity. Sustainability relies on the financial and other benefits brought about the micro hydro power plant during its operation. Traditional valuation method is often used to valuate micro hydro projects however it does not incorporate uncertainty factors, specifically unpredictable changes in weather. Real Options Analysis, on the other hand, uses both the Black-Scholes Model and Binomial Tree Method which incorporates uncertainty. The valuation obtained through real option analysis represents the net present value of the project with decision flexibility option for the investor. In this study, real options analysis is applied to a micro hydro power plant to identify its financial sustainability. Head and flow rate are obtained to calculate the capital investment, electrical sales, maintenance, and cost of operating nearby agricultural facilities. Traditional financial valuation method revealed a positive outcome making the project financially viable. However, real options analysis provided a contradicting result indicating the implementation of the project should be delayed.

AB - Micro hydro power is a clean source of renewable energy that has been utilized for remote communities for electricity generation. The technology is mature and operates the same principle as large hydroelectric power plant but with much lower power capacity. Sustainability relies on the financial and other benefits brought about the micro hydro power plant during its operation. Traditional valuation method is often used to valuate micro hydro projects however it does not incorporate uncertainty factors, specifically unpredictable changes in weather. Real Options Analysis, on the other hand, uses both the Black-Scholes Model and Binomial Tree Method which incorporates uncertainty. The valuation obtained through real option analysis represents the net present value of the project with decision flexibility option for the investor. In this study, real options analysis is applied to a micro hydro power plant to identify its financial sustainability. Head and flow rate are obtained to calculate the capital investment, electrical sales, maintenance, and cost of operating nearby agricultural facilities. Traditional financial valuation method revealed a positive outcome making the project financially viable. However, real options analysis provided a contradicting result indicating the implementation of the project should be delayed.

UR - http://www.scopus.com/inward/record.url?scp=85068672138&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85068672138&partnerID=8YFLogxK

U2 - 10.1088/1755-1315/268/1/012108

DO - 10.1088/1755-1315/268/1/012108

M3 - Conference article

AN - SCOPUS:85068672138

VL - 268

JO - IOP Conference Series: Earth and Environmental Science

JF - IOP Conference Series: Earth and Environmental Science

SN - 1755-1307

IS - 1

M1 - 012108

ER -