ESTIMATING THE PROFITABILITY OF HYDROPOWER INVESTMENTS WITH A CASE STUDY FROM TURKEY

Date

2017-11-20

Author

AKCAY, Emre Caner
Dikmen Toker, İrem
Birgönül, Mustafa Talat
ARDITI, David

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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Energy demand has been increasing, but traditional sources of energy are depletable. New investments are needed in renewable energy production. Hydroelectric power plants are often considered a feasible renewable source of energy and are often organized as a public private partnerships (PPP). However, risk factors stemming from the macro environment as well as project conditions should be considered in performing feasibility studies. The objective of this study was to develop a method that can be used to predict the profitability of hydropower investments considering the relevant risk factors. To that end, a cash flow that represents the construction and operation period is set up, the risk fac­tors involved in such projects are identified, the impacts of these risk factors on the cash flow parameters are assessed, and Monte Carlo simulation is performed to estimate the net present value (NPV) of a hydropower investment. The proposed method was tested in a hydropower investment located in Turkey and generated credible results that could be of great benefit to potential investors operating in similar conditions. The primary contribution of this research is the creation of a method that allows investors to assess the profitability of a hydropower investment by using a stochastic approach.

Subject Keywords

Strategy and Management, Civil and Structural Engineering, Renewable energy, Hydropower investment, Monte Carlo simulation, Cash flow

URI

https://hdl.handle.net/11511/52039

Collections

Department of Civil Engineering, Article