Monte Carlo Valuation of natural gas investments

This paper deals with the valuation of energy assets related to natural gas. In particular, we evaluate a baseload Natural Gas Combined Cycle (NGCC) power plant and an ancillary instalation, namely a Liquefied Natural Gas (LNG) facility, in a realistic setting; specifically, these investments enjoy a long useful life but require some non-negligible time to build. Then we focus on the valuation of several investment options again in a realistic setting. These include the option to invest in the power plant when there is uncertainty concerning the initial outlay, or the option's time to maturity, or the cost of CO2 emission permits, or when there is a chance to double the plant size in the future. Our model comprises three sources of risk. We consider uncertain gas prices with regard to both the current level and the long-run equilibrium level; the current electricity price is also uncertain. They all are assumed to show mean reversion. The two-factor model for natural gas price is calibrated using data from NYMEX NG futures contracts. Also, we calibrate the one-factor model for electricity price using data from the Spanish wholesale electricity market, respectively. Then we use the estimated parameter values alongside actual physical parameters from a case study to value natural gas plants. Finally, the calibrated parameters are also used in a Monte Carlo simulation framework to evaluate several American-type options to invest in these energy assets. We accomplish this by following the least squares MC approach.

Influence of Humidity on Fiber Bragg Grating Sensors

We demonstrate the influence of the relative humidity (RH) on the wavelength of fiber Bragg grating sensors (FBGS), performing tests with five FBGS at different humidity and temperature conditions. These tests were performed in a climate chamber whose RH changes according to a scheduled profile from 30% to 90%, in steps of 10%. These profiles were repeated for a wide range of temperatures from to , in steps of . Two different types of instrumentation methods have been tested, spot welding and epoxy bonding, in two different materials, steel and carbon fiber reinforced polymer (CFRP). We discuss the results for each type of sensor and instrumentation method by analyzing the linearity of the Bragg wavelength with RH and temperature.