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.

Proceedings of the PICES/CoML/IPRC Workshop on Impact of Climate Variability on Observation and Prediction of Ecosystem and Biodiversity Changes in the North Pacific

Table of Contents [pdf, 0.09 Mb] Section I - Presentations and Discussions at Plenary Sessions Introduction and Overview of Workshop Objectives [pdf, 0.07 Mb] Plenary Session Presentations [pdf, 2.23 Mb] Reports of the Breakout Group Discussions [pdf, 0.43 Mb] Closing Plenary Discussion and Recommendations [pdf, 0.11 Mb] Section II - Extended Abstracts of Individual Presentations at Breakout Group Sessions Breakout Group 1: Physical/Chemical Oceanography and Climate [pdf, 6.14 Mb] Breakout Group 2: Phytoplankton, Zooplankton, Micronekton and Benthos [pdf, 28.14 Mb] Breakout Group 3: Fish, Squid, Crabs and Shrimps [pdf, 4.30 Mb] Breakout Group 4: Highly Migratory Fishes, Seabirds and Marine Mammals [pdf, 6.27 Mb] Appendix 1. Workshop agenda [pdf, 0.15 Mb] Appendix 2. List of participants [pdf, 0.13 Mb] (Document pdf contains 216 pages)

The valuation of riparian fisheries in Southern and Eastern Africa

This paper reviews the published and gray literature concerning economic valuations of river fisheries in eastern and southern Africa, extracting the best available information on their direct economic values and on the impacts of changes in water management on this value. It then assesses the methods used and makes recommendations regarding approaches to be used in future. The review concentrates on rivers with their associated floodplains and major deltas. The values and issues associated with estuaries and lakes are not considered.

Recreational anglers' valuation of near-shore marine fisheries in Florida

This report describes and summarizes the results from a state-wide survey of Florida resident saltwater anglers. The survey was designed to provide estimates of the economic value anglers place on marginal changes in management of selected near-shore marine species. The Contingent valuation method was used to elicit angler willingness to pay for changes in management for redfish, seatrout , mullet, sheepshead, pompano. and king mackerel. Contingent valuation is a process in which respondents are presented with a detailed scenario that describes an opportunity to express their willingness to pay for a proposed change in current conditions. The process consists of three parts. First. the change in current conditions, or the "good" to be valued is described. Second, the payment method is described. The payment method is usually closely related to typical methods of buying goods similar to the one to be valued. Finally. the respondent is asked how much they would pay for the good described in the scenario. A special saltwater fishing license stamp that would allow the holder to take advantage of the described management change was used as a payment mechanism. (PDF contains 147 pages.)

Applying hedonic property models in the planning and evaluation of shoreline management

According to the Millennium Ecosystem Assessment’s chapter “Coastal Systems” (Agardy and Alder 2005), 40% of the world population falls within 100 km of the coast. Agardy and Alder report that population densities in coastal regions are three times those of inland regions and demographic forecasts suggest a continued rise in coastal populations. These high population levels can be partially traced to the abundance of ecosystem services provided in the coastal zone. While populations benefit from an abundance of services, population pressure also degrades existing services and leads to increased susceptibility of property and human life to natural hazards. In the face of these challenges, environmental administrators on the coast must pursue agendas which reflect the difficult balance between private and public interests. These decisions include maintaining economic prosperity and personal freedoms, protecting or enhancing the existing flow of ecosystem services to society, and mitigating potential losses from natural hazards. (PDF contains 5 pages)

The Costs of Ecosystem Adaptation: Methodology and Estimates for Indian Forests

34 p.

Divergences in the Long Run Trends in the Price of Energy and of Energy Services

32 p.

Valuation of wind energy projects: A real options approach

27 p.

The application of methods of ecosystem analysis to the evaluation of water quality

Guided by experience and the theoretical development of hydrobiology, it can be considered that the main aim of water quality control should be the establishment of the rates of the self-purification process of water bodies which are capable of maintaining communities in a state of dynamic balance without changing the integrity of the ecosystem. Hence, general approaches in the elaboration of methods for hydrobiological control are based on the following principles: a. the balance of matter and energy in water bodies; b. the integrity of the ecosystem structure and of its separate components at all levels. Ecosystem analysis makes possible a revelation of the whole totality of factors which determine the anthropogenic evolution of a water body. This is necessary for the study of long-term changes in water bodies. The principles of ecosystem analysis of water bodies, together with the creation of their mathematical models, are important because, in future, with the transition of water demanding production into closed cycles of water supply, changes in water bodies will arise in the main through the influence of 'diffuse' pollution (from the atmosphere, with utilisation in transport etc.).

Valuation of Wind Energy Projects: A Real Options Approach

We address the valuation of an operating wind farm and the finite-lived option to invest in it under different reward/support schemes: a constant feed-in tariff, a premium on top of the electricity market price (either a fixed premium or a variable subsidy such as a renewable obligation certificate or ROC), and a transitory subsidy, among others. Futures contracts on electricity with ever longer maturities enable market-based valuations to be undertaken. The model considers up to three sources of uncertainty: the electricity price, the level of wind generation, and the certificate (ROC) price where appropriate. When analytical solutions are lacking, we resort to a trinomial lattice combined with Monte Carlo simulation; we also use a two-dimensional binomial lattice when uncertainty in the ROC price is considered. Our data set refers to the UK. The numerical results show the impact of several factors involved in the decision to invest: the subsidy per MWh generated, the initial lump-sum subsidy, the maturity of the investment option, and electricity price volatility. Different combinations of variables can help bring forward investments in wind generation. One-off policies, e.g., a transitory initial subsidy, seem to have a stronger effect than a fixed premium per MWh produced.