Generating value: real optionality in the EdF take-over of British Energy

Earlier this year, EDF’s long-awaited acquisition of the British Energy was completed. But what was the company’s rationale behind the £12.5 billion takeover of the UK nuclear generator

Design Flaws in the United Kingdom Renewable Energy Support Scheme

Soon after the UK’s Feed-in Tariff (FiT) Scheme providing incentive prices for renewable energy was introduced in 2010, adjustments and modifications were made to eligibility criteria and incentive prices. Prices paid for renewable energy (RE) under the scheme were cut, deployment caps were introduced, and preliminary accreditation and efficiency standards were imposed. Controversy ensued as supporters sought help for the nascent RE technologies, while detractors claimed that the scheme was a wasteful means of reducing greenhouse gases. In this research, we examine how RE was incentivized under the FiT Scheme and its wider impact upon various stakeholders to assess its compatibility with liberalized electricity markets of the UK. We employ a financial performance metric to measure the direct costs of RE in compensation to investors and financial option theory to analyze the externalities of RE generation. As a means of reducing atmospheric CO2, the FiT Scheme was expensive, and the externalities imposed upon stakeholders were large. Whilst the UK scheme was effective in delivering RE capacity, our findings show that the scheme was flawed because the compensation provided to investors was greater than required while large indirect costs were ignored. Although eventually reducing feed-in tariffs addressed direct costs in compensation to RE investors, the externalities arising from stochastic renewable output under dispatch prioritization remain. Given the magnitude of externalities, large volumes of RE may be incompatible with the current design of electricity markets

A financial option perspective on energy security and strategic storage

On the whole, research into energy security falls into one of three perspectives: The political perspective, the engineering and geologic perspective, or the economic perspective emphasising market resilience. Common to these perspectives is the emphasis upon examining exposure to supply disruption, but not its probability of occurrence. As petroleum markets have shown themselves generally resilient to secular events and actual disruptions rare, despite perennial concerns, we ask if our understanding of security cannot be improved? We apply financial option theory to three eventful periods to learn the expectations of market participants on the probability of disruptions. We find the forward-looking views of petroleum market participants to be accurate with regard to both price persistence and the resilience of markets in absorbing shocks. Our results cast doubt upon the need for emergency inventories unless justified to dampen market volatility on public good grounds

A financial option perspective on OPEC strategy

Abstract. The article examines the use of discretionary production by key OPEC members to protect the long-term value of their reserves.  Although interpretations vary on its behaviour and market power, the organisation sees its role as promoting the security of supply through stabilising markets while protecting market share and ensuring a fair return to capital. Given the new and perennial challenges facing its members, there are diverse views on how these policy objectives may be promoted.  Using option theory, we argue that the market stabilisation policy of OPEC in effect, provides free risk management to the global market and conflicts fundamentally with its long-term objective of protecting market share through discouraging high-cost marginal producers.   Abandoning this policy, the returns to marginal producers, adjusted for risk, would be reduced. As implications of our research, rather than creating a social good through mitigating price risk, OPEC should allow markets to be volatile and even consider using its discretionary buffer in a pro-cyclic manner, to protect the long-term value of its reserves.Keywords. OPEC, Risk Management, Shale Petroleum.JEL. Q02, Q43, Q48, Q58

A financial option perspective on OPEC strategy

The article examines the use of discretionary production by key OPEC members to protect the long-term value of their reserves. Although interpretations vary on its behaviour and market power, the organisation sees its role as promoting the security of supply through stabilising markets while protecting market share and ensuring a fair return to capital. Given the new and perennial challenges facing its members, there are diverse views on how these policy objectives may be promoted. Using option theory, we argue that the market stabilisation policy of OPEC in effect, provides free risk management to the global market and conflicts fundamentally with its long-term objective of protecting market share through discouraging high-cost marginal producers. Abandoning this policy, the returns to marginal producers, adjusted for risk, would be reduced. As implications of our research, rather than creating a social good through mitigating price risk, OPEC should allow markets to be volatile and even consider using its discretionary buffer in a pro-cyclic manner, to protect the long-term value of its reserves

Heidegger and Blumenberg on modernity

The debate surrounding the way in which Heidegger and Blumenberg understand the modern age is an opportunity to discuss two different approaches to history. On one hand, from Heidegger's perspective, history should be understood as starting from how Western thought related to Being, which, in metaphysical thinking, took the form of the forgetfulness of Being. Thus, the modern age represents the last stage in the process of forgetfulness of Being, which announces the moment of the rethinking of the relationship with Being by appealing to the authentic disclosure of Being. On the other hand, Blumenberg understands history as the result of the reoccupation process, which means replacing old theories with other new ones. Thus, to the historical approach it is not important to identify epochs as periods of time between two events, but to think about the discontinuities occurring throughout history. Starting from here, the modern age will be thought of not as an expression of the radicalization of the forgetfulness of Being, but as a response to the crises of medieval conceptions. For the same reason, the interpretation of history as a history of the forgetfulness of Being is considered by Blumenberg to subordinate history to an absolute principle, without taking into account its protagonists' needs and necessities

Publisher Correction: Genetic tool development in marine protists: emerging model organisms for experimental cell biology.

An amendment to this paper has been published and can be accessed via a link at the top of the paper