Analysis of Critical Electricity Price for the Investment for Constructing a Nuclear Power Plant using Real Options Approach

In this study, we have analyzed critical electricity price that validates the investment for constructing a nuclear power plant (NPP) using real options approach. In this approach, the uncertainty of future electricity price and the option value to invest are considered. Results show that the critical prices calculated by real options approach are usually significantly higher than the prices calculated by conventional net present value (NPV) approach. Moreover, it is observed that the critical price strongly depends on the volatility of uranium price, and the larger the volatility is, the higher the critical price is.