Skip to main content
Article thumbnail
Location of Repository

Nuclear Power: a Hedge against Uncertain Gas and Carbon Prices?

By Fabien A. Roques, William J. Nuttall, David Newbery and Richard de Neufville

Abstract

High fossil fuel prices have rekindled interest in nuclear power. This paper identifies specific nuclear characteristics making it unattractive to merchant generators in liberalised electricity markets, and argues that non-fossil fuel technologies have an overlooked à ¢à  à  option valueà ¢à  à  given fuel and carbon price uncertainty. Stochastic optimisation estimates the company option value of keeping open the choice between nuclear and gas technologies. This option value decreases sharply as the correlation between electricity, gas, and carbon prices rises, casting doubt on whether private investorsà ¢à  à  fuel-mix diversification incentives in electricity markets are aligned with the social value of a diverse fuel-mix

Topics: stochastic optimisation, fuel-mix, diversification, Classification-JEL: C15, C61, L52, L94, Nuclear economics
Publisher: Faculty of Economics
Year: 2006
OAI identifier: oai:www.repository.cam.ac.uk:1810/131607
Provided by: Apollo

Suggested articles

Citations

  1. Academy of Engineering (2004), “The Cost of Generating Electricity”, a study carried out by PB Power for the Royal Academy of Engineering,
  2. (2000). Agency & Nuclear Energy Agency, doi
  3. Amundsen and L.Bergman (2005), “The Nordic Market: doi
  4. (2004). an option to build: regulatory uncertainty and the development of new electricity generation”,
  5. (1962). Behavior of the Firm under regulatory constraint,”
  6. (2002). Business Case for New Nuclear Power Plants: Bringing Public and Private Resources together for Nuclear Energy”,
  7. (2005). Choice of nuclear power investments under price uncertainty: Valuing modularity,” doi
  8. (2005). Commodities and Commodity Derivatives - Modelling and Pricing For Agriculturals, Metals And Energy,”John doi
  9. (2003). Coûts de référence de la production électrique",
  10. (1999). Cycles in competitive electricity markets: a simulation study of the western doi
  11. (2004). Deregulated power prices: comparison of volatility,” doi
  12. (2005). Energy Path Corporation and Sandia Laboratories (2005), “NP2010 Texas Gulf Coast feasibility study, final report”, prepared by the Texas Institute for the Advancement of Chemical Technology,
  13. (2005). Exploiting the Oil-GDP Effect to Support Renewables Deployment”, doi
  14. (2002). Input price risk and optimal timing of energy investment: choice between fossil- and biofuels",
  15. (1993). Investments of uncertain cost,” doi
  16. (2003). Joint Energy Security of Supply Working Group DTI/OFGEM,
  17. (2003). Keeping the nuclear Option Open”,
  18. (2005). Modelling long-term dynamics of electricity markets," Energy Policy, doi
  19. Nuclear Energy Agency, doi
  20. (2000). Nuclear power: least cost option for base-load electricity in Finland. doi
  21. (2004). Nuclear Renaissance: Technologies and Policies for the Future of Nuclear Power”, doi
  22. (1979). Option Pricing: A Simplified Approach,” doi
  23. (2005). Plans for new reactors worldwide,”
  24. (2005). Projected costs of generating electricity, doi
  25. (2000). Rapport de la Commission pour l’Analyse des Modes de Production de l’Électricité et le Redéploiement des Énergies (AMPERE)",
  26. (1996). Regulation, public ownership, and privatisation of the English electricity industry”, doi
  27. (2001). Science and precaution in the appraisal of electricity supply options’, doi
  28. (2004). The Economic Future Of Nuclear Power,” A Study Conducted At The
  29. (1993). The effect of industrial structure on learning by doing in nuclear power plant operation”, doi
  30. (2003). The Future Of Nuclear Power",
  31. (2004). U.S. Nuclear Power Plant Capacity and Capacity Factors,” available on NEI’s website http://www.nei.org/.
  32. (2001). What Is It Worth? Application of Real Options Theory to the Valuation of doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.