Stochastic interest rates in the analysis of energy investments: Implications on economic performance and sustainability

Tolis, A; Doukelis, A; Tatsiopoulos, I

dc.contributor.author	Tolis, A	en
dc.contributor.author	Doukelis, A	en
dc.contributor.author	Tatsiopoulos, I	en
dc.date.accessioned	2014-03-01T01:34:41Z
dc.date.available	2014-03-01T01:34:41Z
dc.date.issued	2010	en
dc.identifier.issn	0306-2619	en
dc.identifier.uri	https://dspace.lib.ntua.gr/xmlui/handle/123456789/20793
dc.subject	Real-options	en
dc.subject	Interest rate	en
dc.subject	Electricity market	en
dc.subject	Stochastic models	en
dc.subject.classification	Energy & Fuels	en
dc.subject.classification	Engineering, Chemical	en
dc.subject.other	CLIMATE POLICY	en
dc.subject.other	TERM STRUCTURE	en
dc.subject.other	UNCERTAINTY	en
dc.subject.other	OPTIMIZATION	en
dc.subject.other	OPTIONS	en
dc.subject.other	SECTOR	en
dc.title	Stochastic interest rates in the analysis of energy investments: Implications on economic performance and sustainability	en
heal.type	journalArticle	en
heal.identifier.primary	10.1016/j.apenergy.2009.11.033	en
heal.identifier.secondary	http://dx.doi.org/10.1016/j.apenergy.2009.11.033	en
heal.language	English	en
heal.publicationDate	2010	en
heal.abstract	A systematic impact assessment of stochastic interest and inflation rates on the analysis of energy investments is presented. A real-options algorithm has been created for this task. Constant interest rates incorporating high risk premium have been extensively used for economic calculations, within the framework of traditional direct cash flow methods, thus favouring immediate, irreversible investments in the expense of, sometimes, insubstantially low anticipated yields In this article. not only incomes and expenses but also interest and inflation rates are considered stochastically evolving according to specific probabilistic models. The numerical experiments indicated that the stochastic interest rate forecasts fluctuate in such low levels that may signal delayed investment entry in favour of higher expected yields. The implementation of stochastically evolving interest rates in energy investment analysis may have a controversial effect on sustainability Displacements of inefficient plants may be significantly delayed, thus prolonging high CO2 emission rates Under the current CO2 allowance prices or their medium-term forecasts, this situation may not be improved and flexible policy interventions may be necessitated (C) 2009 Elsevier Ltd All rights reserved	en
heal.publisher	ELSEVIER SCI LTD	en
heal.journalName	APPLIED ENERGY	en
dc.identifier.doi	10.1016/j.apenergy.2009.11.033	en
dc.identifier.isi	ISI:000279134200006	en
dc.identifier.volume	87	en
dc.identifier.issue	8	en
dc.identifier.spage	2479	en
dc.identifier.epage	2490	en