Generation investment decision based on the theory of real option in the power market environment

The world-wide power industry restructuring has introduced more uncertain factors for generation investment decision-making, and hence more flexibility concerning the investment strategy required. First this paper uses the real option aiming at maximizing the value of the generator and studies the difference of the equilibrium investment point under competition and cooperation is discussed. The result shows that the equilibrium investment point under cooperation is better than the counterpart under competition due to ignoring the delay option caused by competition for the sake of the first-move advantage. Second based on the well-developed Black-Scholes option pricing theory, the paper evaluates the delay option of generation investment, and analyzes it by one example. This method is more applicable to the generation investment decision-making problem in the power market environment and has realistic significance.