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LAPSE:2019.0439
Published Article
LAPSE:2019.0439
Lobatto-Milstein Numerical Method in Application of Uncertainty Investment of Solar Power Projects
Mahmoud A. Eissa, Boping Tian
March 26, 2019
Recently, there has been a growing interest in the production of electricity from renewable energy sources (RES). The RES investment is characterized by uncertainty, which is long-term, costly and depends on feed-in tariff and support schemes. In this paper, we address the real option valuation (ROV) of a solar power plant investment. The real option framework is investigated. This framework considers the renewable certificate price and, further, the cost of delay between establishing and operating the solar power plant. The optimal time of launching the project and assessing the value of the deferred option are discussed. The new three-stage numerical methods are constructed, the Lobatto3C-Milstein (L3CM) methods. The numerical methods are integrated with the concept of Blackā»Scholes option pricing theory and applied in option valuation for solar energy investment with uncertainty. The numerical results of the L3CM, finite difference and Monte Carlo methods are compared to show the efficiency of our methods. Our dataset refers to the Arab Republic of Egypt.
Keywords
Egypt, numerical simulation, real option, Renewable and Sustainable Energy, stochastic differential equation
Suggested Citation
Eissa MA, Tian B. Lobatto-Milstein Numerical Method in Application of Uncertainty Investment of Solar Power Projects. (2019). LAPSE:2019.0439
Author Affiliations
Eissa MA: Department of Mathematics, Harbin Institute of Technology, Harbin 150001, China; Department of Mathematics, Faculty of Science, Menoufia University, Menoufia 32511, Egypt
Tian B: Department of Mathematics, Harbin Institute of Technology, Harbin 150001, China
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Journal Name
Energies
Volume
10
Issue
1
Article Number
E43
Year
2017
Publication Date
2017-01-03
Published Version
ISSN
1996-1073
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Original Submission
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PII: en10010043, Publication Type: Journal Article
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LAPSE:2019.0439
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doi:10.3390/en10010043
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Mar 26, 2019
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Mar 26, 2019
 
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Calvin Tsay
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