With the market liberalization of the energy sector and the resulting increase in market uncertainty, traditional project evaluation techniques (e.g., net present value or discounted cash flow analysis) are no longer sufficient to properly deal with risk and uncertainty. Consequently, the use of more sophisticated and powerful project evaluation methods, such as real options analysis (ROA), has also become more relevant in the energy sector. ROA allows for the application of different types of options (e.g., to defer, abandon, expand, contract, shut down, grow, etc.) with respect to project specification and managerial actions that have to be undertaken.
The students are able to:
· … learn about the investment evaluation methods
· … apprehend the basics of real options analysis
· … apply real options analysis to investment decision problems in the energy sector (e.g. concerning power plants)
