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Fuzzy Real Options Analysis Applied to Urban Renewable Energy Investments

Partridge, C; Medda, FR; (2017) Fuzzy Real Options Analysis Applied to Urban Renewable Energy Investments. International Journal of Latest Research in Engineering and Technology , 3 (9) pp. 133-147. Green open access

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Abstract

The application of real options and fuzzy real options to renewable energy investment decisions is explored in the context of the valuation of three urban rooftop solar projects. Four real options methods were used to analyse the abandonment option present within these projects. Two of these methods, Fuzzy Black-Scholes and Fuzzy Binomial, used fuzzy numbers for the cashflow and salvage inputs. The resulting European put valuations for the option to sell the projects off for salvagewere consistent across the various techniques, including both classical and fuzzy. The real options present within the solar projects consistently added value to the adjusted net present values of the projects, which should improve their investment prospects. Additionally, we discuss the role of using fuzzy options pricing techniques as opposed to traditional real options and their usefulness to the practitioner.

Type: Article
Title: Fuzzy Real Options Analysis Applied to Urban Renewable Energy Investments
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.ijlret.com/Papers/Vol-3-issue-9/12-B201...
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Civil, Environ and Geomatic Eng
URI: https://discovery.ucl.ac.uk/id/eprint/10022790
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