The Research On Timing Decision-making Of Power Plant Investment Under Technology Uncertainty

In terms of electricity Investment, power plant investment projects generally have the characteristics of large-scale and longer lead time. There have a lost of uncertainty factor in process of power plant investment. When investors make decision to invest power plant project, it is no doubt for investor to take full account of the impact of various uncertainties in the process of construction Power plant construction and operation. Moreover, China’s electric power industry’s ongoing market-oriented reforms. It added lots of new variables and requirements because of policy changes, introduction of market mechanisms in the power plant investment decision-making. Thus, it is very important for investors to analysis the impact of market mechanisms under the random uncertainties in order to format rational, scientific generating capacity investment decisions.Based on the analyses the traditional power investment decision-making and the real options decision-making, The article has in-depth analysis the uncertainty to affect investments in power plants in three areas:uncertainty to impact electricity demand, uncertainty to affect the construction projects investment cost, other relevant uncertainties.The main purpose of this study is intended for technical progress how to impact the timing of investments in power plants. The main problem is to focus on researching the company’s optimal strategic behavior, when the company, maximizing the value, has faced with an exogenous technological advance.Therefore, based on having comparative analysis of technological advances change and benefits change, the investment decision-making model has been built with comprehensive consideration of technology and benefits uncertainty. According to the model established, three kinds of investment situations have been analyzed:power price-fixing, technological progress, the overall decline in investment costs. It mainly took into account for the interaction of two effects on investment timing in the study. Analysis is based on irreversible investment under uncertainty theory (theory of the irreversible investment under uncertainty). This approach is discussed in front of real options approach, this method was used to research a company how to choose the best investment timing problem, when the decision-making can not be reversed, and the value of investment project is random.