An Evaluation of Italian Electricity Generation Assets Using a Spark Spread Option Model
11 Pages Posted: 26 Aug 2009
Date Written: June 21-22, 2001
This paper analyzes past and future values of the Spark Spread in Italy, showing how power generation assets can be evaluated using a Spark Spread option model. Variable costs and the organization of the electricity pool is discussed and, through an option-based simulation model, price volatility and power generation assets values are calculated, comparing the results against the traditional discounted cash flow methodology (DCF).
La versione in lingua italiano di questo paper si trova in http://ssrn.com/abstract=2028944
Keywords: spark spread, real options, Margrabe's option model, power generation, electricity markets, electricity pool, electricity assets, merchant power plant, discounted cash flow methodology
JEL Classification: D46, G13, L94
Suggested Citation: Suggested Citation