Investment strategy for shallow geothermal resource based on real option model

Shallow geothermal resource has been considered as a new and promising form for clean heating in some areas in China, such as Xiong’an New Area. In this paper, a real option model is established to explore the optimal investment timing and investment scale of shallow geothermal resources. According to numerical results, we found that in the reference scenario the critical value of marginal revenue is 4.30 yuan / m2, and the optimal investment scale is 1.28 million square meters. Simultaneously, the investors are advised to invest after 1.05 years and they will get the unit investment return of 39.34 yuan / m2.