Applying the Real Option Approach on Nuclear Power Project Decision Making

Because of the increasing concerns with environmental quality and sustainable development, nuclear has been seen as an important alternative to conventional energy sources in China. According to the “Long- term development plan for nuclear power industry (2005 to 2020) which released in 2006, China projected to create 70 GWe installed capacity by 2020, and 250 GW or over by 2030. This ambitious plan also faces considerable risks with respect to new technology adaption, construction management, project coordination and procurements. A real options method was applied to evaluate how these risks and uncertainties impact on the development of new power plants in China. The option model integrated with construction, regulatory, and operational uncertainties, factors which are under different scenarios in an option of abandon or delay regarding the project development and technology adaption. To perform the real options approach on China nuclear power plant sector and policy options, all necessary factors are considered and addressed.