This chapter shows how portfolio values differ from NPVs when decisions are taken under conditions of managerial flexibility. Applying the Portfolio Strategic Options approach, the certainty of payoffs is traded off against the prospect of variable, albeit higher, returns when prices are high. Through a discovery process with adaptive actions, technology choices are better aligned to the managers’ risk-payoff preferences by choosing from amongst these generic supply strategies: (a) indexing energy costs and power prices to achieve predictability in payoffs; (b) increasing renewables with the expectation of rising prices; or (c) hedge payoffs by balancing fossil fuels-based supplies with renewables. This dynamic approach guides managerial actions to recognise the realities of inherently volatile energy markets and adaptively profit from uncertainties.
- Barcelona, R. G. (2015). Renewable energy with volatile prices: Why NPV fails to tell the whole story. Journal of Applied Corporate Finance, 27(1), 101–109.Google Scholar
- British Broadcasting Corporation (BBC). (2016, March 12). Doubts over EDF’s plans for Hinkley Point nuclear power station.Google Scholar
- BP Statistical Review. (2016). Retrieved http://www.bp.com/content/dam/bp/pdf/energy-economics/statistical-review-2016/bp-statistical-review-of-world-energy-2016-full-report.pdf. Accessed 16 December 2016.
- BP Energy Outlook. (2016). http://www.bp.com/en/global/corporate/energy-economics/energy-outlook-2035.html. Accessed 16 December 2016.
- EIA—Energy Information Administration. (2014). International energy outlook, 2014. Washington, DC: Energy Information Administration. Google Scholar
- Gerrar, M. B. (1993). The victim of NIMBY. Fordham Urban Law Journal., 21(3), 495–522.Google Scholar
- Parker, D. (2012). The official history of privatisation: Popular capitalism, 1987–1997 (Vol. II). Oxon: Routledge.Google Scholar
- The Telegraph. (2003, October 2). Deal keeps lights on at British Energy.Google Scholar
- Union of Concerned Scientists—UCS. (2016). http://www.ucsusa.org/nuclear-power/nuclear-power-accidents/history-nuclear-accidents#.WFO_RndDm1s. Accessed 16 December 2016.