Table 2 Description of variables and parameters
From: A real options approach to renewable electricity generation in the Philippines
Notation | Description |
|---|---|
C D | Annual marginal cost of electricity production using diesel, in US$ |
C R | Annual marginal cost of electricity production using renewable energy, in US$ |
I R | Investment cost for renewable energy, in US$ |
NPV R | Net present value of investing in RE, in US$ |
P D, t | Stochastic price of diesel, in US$/barrel |
P E | Electricity price, in US$/MWh |
Q D | Quantity of diesel needed to produce Q E , in barrels |
Q E | Quantity of electricity produced, in MWh |
V D, t | Option value of investment at each price of diesel, D, at each period of investment, t, in US$ |
\( {\mathbb{E}\mathrm{NPV}}_{D,t} \) | Expected net present value of continuing diesel for electricity generation, in US$ |
\( {\mathbb{i}}_{\tau \le T} \) | Indicator equal to 1 if switching to RE is made, otherwise, equal to 0 |
π D, t | Profit of using diesel for electricity generation from initial period of investment, 0, to period of switching to RE, τ, in US$ |
T | Total period of investment |
tax | Externality tax for using diesel |
ρ | Discount factor |
τ | Period of switching from diesel to RE |