A simulation based real options approach for the investment evaluation of nuclear power

The investment of nuclear power has several uncertainties. This paper establishes a nuclear power investment evaluation model by employing real options theory with Monte Carlo method to evaluate the value of nuclear power plant from the perspective of power generation enterprises. Several technical and economic uncertainty factors (investment cost, generating cost, electricity prices and nuclear accident) have been taken into account in the model and the model is solved by Least Squares Monte-Carlo (LSM) method. As an application, the model is used to evaluate Sanmen nuclear power plant in Zhejiang province, China. The impacts of three electricity price mechanisms and nuclear power investment cost reduction are investigated and discussed.

► This paper establishes a nuclear power investment evaluation model by employing real options theory with Monte Carlo method.
► Several uncertainty factors have been taken into account and the model is solved by Least Squares Monte-Carlo (LSM) method.
► As an application, the model is used to evaluate Sanmen nuclear power plant in Zhejiang province, China.
► The impacts of three electricity price mechanisms and nuclear power investment cost reduction are investigated and discussed.