{"title":"Real options valuation for geothermal investments considering technology selection and carbon credit: A feasibility study in Indonesia","authors":"Jodhi Pramuji Giriarso, Dzikri Firmansyah Hakam","doi":"10.1016/j.seta.2025.104557","DOIUrl":null,"url":null,"abstract":"<div><div>This study integrates conventional Discounted Cash Flow (DCF) analysis with Real Options Valuation (ROV) to assess the feasibility of geothermal power plant projects utilizing two distinct technologies: Flash Condensing (FC) and Two-Phase Binary (TPB), while also considering new revenue streams derived from carbon credits. With a discount rate of 8 %, FC demonstrates superior financial performance compared to TPB. Sensitivity analysis also indicates that the IRR of both technologies is significantly influenced by interest rates, CAPEX exploitation and exploration drilling, as well as OPEX and other costs. FC demonstrates greater resilience to ± 10 % cash flow variations, making it a feasible technology at present. However, TPB has the potential to enhance its investment evaluation value, when costs can be reduced and there is the implementation of a voluntary international market for carbon credits. TPB could become more viable if the carbon credit price increases to at least $7.4/tCO2e. FC technology offers expansion opportunities by utilizing hot brine that can still be converted into energy. The expansion option, modeled using European call option Black-Scholes Model and Binomial Lattice Model, can enhance the project’s ENPV to approximately $3.86 M for FC-1 and $16.80 M for FC-2. This provides flexibility and a robust framework for uncertainties regarding decision-making at the top management level. Furthermore, it will support the development of the geothermal industry in Indonesia, the global energy transition, and achieving net zero emissions targets.</div></div>","PeriodicalId":56019,"journal":{"name":"Sustainable Energy Technologies and Assessments","volume":"83 ","pages":"Article 104557"},"PeriodicalIF":7.0000,"publicationDate":"2025-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Sustainable Energy Technologies and Assessments","FirstCategoryId":"5","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2213138825003881","RegionNum":2,"RegionCategory":"工程技术","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ENERGY & FUELS","Score":null,"Total":0}
引用次数: 0
Abstract
This study integrates conventional Discounted Cash Flow (DCF) analysis with Real Options Valuation (ROV) to assess the feasibility of geothermal power plant projects utilizing two distinct technologies: Flash Condensing (FC) and Two-Phase Binary (TPB), while also considering new revenue streams derived from carbon credits. With a discount rate of 8 %, FC demonstrates superior financial performance compared to TPB. Sensitivity analysis also indicates that the IRR of both technologies is significantly influenced by interest rates, CAPEX exploitation and exploration drilling, as well as OPEX and other costs. FC demonstrates greater resilience to ± 10 % cash flow variations, making it a feasible technology at present. However, TPB has the potential to enhance its investment evaluation value, when costs can be reduced and there is the implementation of a voluntary international market for carbon credits. TPB could become more viable if the carbon credit price increases to at least $7.4/tCO2e. FC technology offers expansion opportunities by utilizing hot brine that can still be converted into energy. The expansion option, modeled using European call option Black-Scholes Model and Binomial Lattice Model, can enhance the project’s ENPV to approximately $3.86 M for FC-1 and $16.80 M for FC-2. This provides flexibility and a robust framework for uncertainties regarding decision-making at the top management level. Furthermore, it will support the development of the geothermal industry in Indonesia, the global energy transition, and achieving net zero emissions targets.
期刊介绍:
Encouraging a transition to a sustainable energy future is imperative for our world. Technologies that enable this shift in various sectors like transportation, heating, and power systems are of utmost importance. Sustainable Energy Technologies and Assessments welcomes papers focusing on a range of aspects and levels of technological advancements in energy generation and utilization. The aim is to reduce the negative environmental impact associated with energy production and consumption, spanning from laboratory experiments to real-world applications in the commercial sector.