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http://dx.doi.org/10.15266/KEREA.2019.28.2.177

Real Options Study on Nuclear Phase Down Policy under Knightian Uncertainty  

Park, Hojeong (Department of Food and Resource Economics, KU KIST Green School)
Lee, Sangjun (Korea Energy Economics Institute)
Publication Information
Environmental and Resource Economics Review / v.28, no.2, 2019 , pp. 177-200 More about this Journal
Abstract
Energy demand forecast which serves as an essential input in energy policy is exposed to multiple factors of uncertainty such as GDP and weather forecast uncertainty. The Master Plan of Electricity Market in Korea which is biennially prepared is critically based on fluctuating energy demand forecast whereas its resulting proposal on electricity generation mix is substantially irreversible. The paper provides a real options model to evaluate energy transition policy by considering Knightian uncertainty as a measure to study multiple uncertainties with multiple set of probability distributions. Our finding is that the current energy transition policy under the master plan is not robust in terms of securing stable management of electricity demand and supply system.
Keywords
Knightian uncertainty; Nuclear phase down; Real options;
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