Analysis
Renewable Energy Investment Under Policy Uncertainty
Overview
What this challenge is about.
You are a financial analyst at SunVest. The proposed solar farm has a capacity of 50 MW, construction cost €80M, and expected life 25 years. Key uncertainties: annual electricity price (currently €50/MWh, volatility 20%) and subsidy level (currently €20/MWh, may be cut by 50% with 30% probability in 2 years). Your task: value the project using discounted cash flow (DCF) and real options (option to delay 1 year, option to abandon after 5 years). Use Monte Carlo simulation to model price paths. Success means a recommendation on whether to invest now, delay, or abandon, with a clear valuation comparison.
The Brief
What you'll do, and what you'll demonstrate.
Determine whether to invest in a solar farm now, delay, or abandon, given uncertainty in electricity prices and subsidy policies.
Earning criteria — what you'll demonstrate
- Apply real options theory to value managerial flexibility under uncertainty
- Model stochastic processes (e.g., geometric Brownian motion) for key variables
- Use Monte Carlo simulation to estimate probability distributions of project value
- Compare traditional DCF with real options valuation and interpret differences
Program Fit
Where this fits in your program.
Sharpens the same skills your degree expects you to demonstrate.
Skills
Skills you'll demonstrate.
Each one shows up on your verified credential.
Careers
Roles this prepares you for.
Real titles. Real skill bridges. Pick the one closest to your trajectory.
Career mappings coming soon.