Sequential Investment in Gas-Fired Power Plants
Journal article, Peer reviewed
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This paper presents an empirical analysis of the real options to postpone and cancel sequential investments with time-to-build. Using generator level data we consider investments in gas-fired combined cycle and combustion turbine electric power generators. We find strong evidence of real options effects. Regulatory uncertainty and profit uncertainty increase the probability of postponing investments. We also find evidence that regulatory uncertainty increases the probability of canceling investments.