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- W2188799238 abstract "Energy efficiency improvement is an important objective of energy policy and strategy in all developed countries. Energy service companies (ESCOs) are usually described as important change agents that can restrain energy demand and attenuate climate change by increasing efficiency. They are the firms that deliver energy services and/or other energy efficiency improvement measures in a user's facility or premises, with a certain degree of financial risk. Payment for the services delivered is based on the achievement of energy efficiency improvements defined by an agreed performance criteria. As a result by the concept of performance-based contracting, ESCOs primarily differ from consulting engineering firms specializing in identifying and offering efficiency improvements, which are typically paid for their advice and undertake no risk that their recommendations will yield results. Therefore when an ESCO undertakes the contract, it goes under both financial and performance risks. The energy price volatility lies in the center of the risk and traditional capital budgeting techniques like net present value (NPV) analysis may not cope with the complex, dynamic and uncertain nature of energy markets. The study introduces a real option decision model for energy service companies to enter an energy service contract considering the risks under uncertainty and dynamism. An illustrative case study that employs energy price fluctuations in Turkey demonstrates the applicability of the proposed model. A sensitivity analysis is also realized by examining the effect of volatility of the energy prices in the market." @default.
- W2188799238 created "2016-06-24" @default.
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- W2188799238 date "2012-01-01" @default.
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- W2188799238 title "A Risk Management Decision Model for Energy Service Companies by Using Real Options" @default.
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