Real Options Model for Energy and Ancillary Services Markets

Goceliakova, Z. (2003). Real Options Model for Energy and Ancillary Services Markets. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-03-016

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Abstract

Traditionally, power plant valuation is based only on its energy output. However, there are other products that can increase its value, as a consequence of the liberalization of energy markets, competitive markets for ancillary services are developing throughout the world.

Under this new dynamic environment we introduce a valuation model, which covers the presence of ancillary services markets. We analyze the opportunities of how the energy producer can increase his profit by providing these services. In the application, we evaluate one turbine from a power plant situated in Germany. We perform a comparison of the situation including and excluding the existence of ancillary service markets.

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