Preprint Article Version 1 NOT YET PEER-REVIEWED

Lobatto-Milstein Numerical Method in Application of Uncertainty Investment of Solar Power Projects

  1. Department of Mathematics, Harbin Institute of Technology, Harbin 150001, China
  2. Department of Mathematics, Faculty of Science, Menoufia University, Menoufia 32511, Egypt
Version 1 : Received: 7 August 2016 / Approved: 8 August 2016 / Online: 8 August 2016 (10:40:51 CEST)
Version 2 : Received: 5 December 2016 / Approved: 6 December 2016 / Online: 6 December 2016 (05:06:45 CET)

How to cite: Eissa, M.; Tian, B. Lobatto-Milstein Numerical Method in Application of Uncertainty Investment of Solar Power Projects. Preprints 2016, 2016080075 (doi: 10.20944/preprints201608.0075.v1). Eissa, M.; Tian, B. Lobatto-Milstein Numerical Method in Application of Uncertainty Investment of Solar Power Projects. Preprints 2016, 2016080075 (doi: 10.20944/preprints201608.0075.v1).

Abstract

Recently, there is a growing interest for the production of electricity from renewable energy sources (RES). The RES investment characterized as uncertainty such that it is long-term, costly, depend on feed-in-tariff and support schemes. In this paper, we address the real option valuation (ROV) of a solar power plant investment. The real option framework is investigated. This framework consider the renewable obligation certificate (ROC) price, furthermore the cost of delay. The optimal time of launching the project and assess the value of deffered and abandonment options are discussed. The new three stage numerical method is constructed, the Lobatto3C-Milstein (L3CM) method. The numerical method is, integrated with concept of Black-Scholes option pricing theory, and applied in option valuation for solar energy investment with uncertainty. Comparing the L3CM method, finite difference and Monte carlo methods to examine the efficiency of our method. Our data set refers to the Arabic republic of Egypt.

Subject Areas

Stochastic differential equation; Numerical Simulation; Real option; Renewable energy; Egypt

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