Comparative evaluation of investment analysis methods: an application in renewable energy auctions between 2011 e 2015
DOI:
https://doi.org/10.5902/1983465955255Keywords:
Net present value, Real options theory, Confusion matrix.Abstract
Purpose - This work aims to analyze the assertiveness of net present value (NPV) and real options theory (ROT), at the moment of decision making for investments in renewable energy projects, considering the 244 winning projects in the auctions of reserve energy that occurred between 2011 and 2015.
Design/methodology/approach –This is a quantitative study that used real data from 150 wind power and 94 photovoltaic projects available on ANEEL´s website. For data analysis, the confusion matrix, the area under the ROC Curve and the Kappa Index were used.
Findings – It was concluded that NPV is more effective for recommendations to invest in projects with chances to be successful, while ROT is more accurate in suggesting against investing in projects with propensity for failure. It was also found that the degree of agreement between the two techniques is substantial and determined by the level of volatility of real options.
Research limitations/implications – The limitations of this study refer to the difficulties of identifying the reasons that motivated failures in the projects.
Originality/value – Theoretically, this work contributes to identify the characteristics that effectively differentiate ROT from NPV at the time of decision making. Empirically, this work contributes to doing an ex-post analysis of the projects.
Downloads
References
Aarle, R. V. (2013). A Real-Options approach to company valuation. Dissertation of Master Degree´s. PhiDelphi Corporate Finance, University of Twente, Netherlands, 95 p.
Abadie, L. M., de Murieta, E. S., & Galarraga, I. (2017). Investing in adaptation: Flood risk and real option application to Bilbao. Environmental Modelling & Software, 95, 76-89. https://doi.org/10.1016/j.envsoft.2017.03.038.
Agência Nacional de Energia Elétrica. Informações do setor elétrico. Recuperado de: http://www.ANEEL.gov.br/geracao4. Acesso em: 14 abr. 2019.
Amarante, O.A.C., Brower, M., Zack, J., & Sá, A. L. (2001). Atlas do potencial eólico brasileiro. Ministério de Minas e Energia, Brasília.
Arif, S., Marshall, N., & Yohn, T. L. (2016). Understanding the relation between accruals and volatility: A real options-based investment approach. Journal of Accounting and Economics, 62(1), 65-86. https://doi.org/10.1016/j.jacceco.2016.04.005
Assaf, A., Neto. (2019). Dividendos distribuídos no Brasil e no setor de energia elétrica https://institutoassaf.com.br/2014/12/05/analise-dividendos-distribuidos-no-brasil-e-no-setor-de-energia-eletrica/
Bacelar, T. S. et al. (2018). Teoria das opções reais (TOR) na avaliação de investimentos em projetos de energia renováveis. In: Congresso Brasileiro de Energia Solar, 8., 2018, Gramado/RS. Anais...Gramado/RS: CBENS, 2018.
Bayer, B. (2018). Experience with auctions for wind power in Brazil. Renewable and Sustainable Energy Reviews, 81, 2644-2658. https://doi.org/10.1016/j.rser.2017.06.070
Black, F., & Scholes, M. (1973). The pricing of options and corporate liabilities. Journal of political economy, 81(3), 637-654. https://doi.org/10.1086/260062
Borges, G.G.; Simone, L. F. C. (2018). Estabilidade regulatória e o cálculo do custo médio ponderado de capital das distribuidoras de energia elétrica. In: Congresso Brasileiro de Regulação, XI., 2019. Maceió-AL. Anais... Maceió-AL: XI CER, 2019.
Brandão, L. E., Dyer, J. S., & Hahn, W. J. (2005). Using binomial decision trees to solve real-option valuation problems. Decision Analysis, 2(2), 69-88. https://doi.org/10.1287/deca.1050.0040
Brandão, L. E., Dyer, J. S., & Hahn, W. J. (2012). Volatility estimation for stochastic project value models. European Journal of Operational Research, 220(3), 642-648. https://doi.org/10.1016/j.ejor.2012.01.059
Caelen, O. (2017). A Bayesian interpretation of the confusion matrix. Annals of Mathematics and Artificial Intelligence, 81(3-4), 429-450. Available at: http://www.oliviercaelen.be/doc/confMatrixBayes_AMAI.pdf
Caldas, A.V.S, & Silva, A.F.A, Jr. (2019). Avaliação ex-post dos métodos de análise de investimentos. In: Congresso Internacional de administração. Ponta Grossa-PR. Anais... Ponta Grossa-PR: Adm 2019.
Camblor, P. M., & Fernández, J. C. P. (2019). The Youden index in the generalized receiver operating characteristic curve context. The international journal of biostatistics, 15(1). https://doi.org/10.1515/ijb-2018-0060
Carmo, C. R. S., de Lima, A. D., da Silva Nunes, J. G., & Saad, A. L. M. (2018). An analysis of the electric power public sale profile done in regulated hiring environment from 2005 to 2016. RAGC, 6(23). http://www.fucamp.edu.br/editora/index.php/ragc/article/view/1254/899
Chaudhari, U. K., Kane, M. B., & Wetzstein, M. E. (2016). The key literature of, and trends in, forestry investment decisions using real options analysis. International Forestry Review, 18(2), 146-179. https://doi.org/10.1505/146554816818966291
Cheng, E. K. (2016). The burden of proof and the presentation of forensic results. Harv. L. Rev. F., 130, 154.
Chicco, D., & Jurman, G. (2020). The advantages of the Matthews correlation coefficient (MCC) over F1 score and accuracy in binary classification evaluation. BMC genomics, 21(1), 6. https://doi.org/10.1186/s12864-019-6413-7
Chittenden, F., & Derregia, M. (2015). Uncertainty, irreversibility and the use of ‘rules of thumb’in capital budgeting. The British Accounting Review, 47(3), 225-236. https://doi.org/10.1016/j.bar.2013.12.003
Choi, H. Y., Kwak, S. J., & Yoo, S. H. (2016). Using Real Options Pricing to Value Public R&D Investment in the Deep Seabed Manganese Nodule Project. Asian Journal of Innovation & Policy, 5(2). http//doi.org/10.7545/ajip.2016.5.2.197
Cohen, J. (1960). A coefficient of agreement for nominal scales. Educational and psychological measurement, 20(1), 37-46. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1024.9753&rep=rep1&type=pdf
Convênio ICMS 109, de 21 de outubro de 2014. Autoriza os Estados que menciona a conceder diferimento do ICMS devido nas operações com máquinas, equipamentos e materiais destinados à captação, geração e transmissão de energia elétrica ou eólica incorporados ao ativo imobilizado de estabelecimentos geradores de energia solar ou eólica. Recuperado de: https://www.confaz.fazenda.gov.br/legislacao/convenios/2014/CV109_14
Copeland, T., & Antikarov, V. (2001). Real options: A practitioner’s guide. New York.
Cuervo, F. I., & Botero, S. B. (2016). Wind power reliability valuation in a Hydro-Dominated power market: The Colombian case. Renewable and Sustainable Energy Reviews, 57, 1359-1372. https://doi.org/10.1016/j.rser.2015.12.159
Čulík, M. (2016). Real options valuation with changing volatility. Perspectives in Science, 7, 10-18. https://doi.org/10.1016/j.pisc.2015.11.004
Dagdelenler, G., Nefeslioglu, H. A., & Gokceoglu, C. (2016). Modification of seed cell sampling strategy for landslide susceptibility mapping: an application from the Eastern part of the Gallipoli Peninsula (Canakkale, Turkey). Bulletin of Engineering Geology and the Environment, 75(2), 575-590. https://doi.org/10.1007/s10064-015-0759-0
Damaraju, N. L., Barney, J. B., & Makhija, A. K. (2015). Real options in divestment alternatives. Strategic Management Journal, 36(5), 728-744. https://doi.org/10.1002/smj.2243
Del Giudice, M., Evangelista, F., & Palmaccio, M. (2015). Defining the Black and Scholes approach: a first systematic literature review. Journal of Innovation and Entrepreneurship, 5(1), 5. https://doi.org/10.1186/s13731-015-0030-8
Eissa, M. A., & Tian, B. (2017). Lobatto-milstein numerical method in application of uncertainty investment of solar power projects. Energies, 10(1), 43. https://doi.org/10.3390/en10010043
Espinoza, R. D., & Rojo, J. (2017). Towards sustainable mining (Part I): Valuing investment opportunities in the mining sector. Resources Policy, 52, 7-18. https://doi.org/10.1016/j.resourpol.2017.01.011
Fontanet, F.A. (2012). Avaliação de uma opção de espera de um parque eólico pelo método das opções reais. 2012. Dissertação de Mestrado. Programa de Pós-Graduação em Engenharia Elétrica, Pontifícia Universidade Católica do Rio de Janeiro, Rio de Janeiro, Brasil.
Gazheli, A., & van den Bergh, J. (2018). Real options analysis of investment in solar vs. wind energy: Diversification strategies under uncertain prices and costs. Renewable and Sustainable Energy Reviews, 82, 2693-2704. https://doi.org/10.1016/j.rser.2017.09.096
Gollapudi, S. (2016). Practical machine learning. Packt Publishing Ltd.
González, M. G., & Callejo, S. S. D. (2018). Valuation of sports tourism projects using real options: The case of a Golf Course in Rías Baixas. Cuadernos de Turismo, (42), 691.
Haahtela, T. (2016). Simulation methods in real option valuation. International Journal of Operational Research, 25(4), 487-517. https://doi.org/10.1504/IJOR.2016.075294
Hundal, S., Eskola, A., & Tuan, D. (2019). Risk–return relationship in the Finnish stock market in the light of Capital Asset Pricing Model (CAPM). Journal of Transnational Management, 24(4), 305-322. https://doi.org/10.1080/15475778.2019.1641394
Ibrahim, K., & Haron, R. (2016). Examining systematic risk on Malaysian firms: panel data evidence. Journal of Global Business and Social Entrepreneurship, 1(2), 26-30.
Kim, K., Park, H., & Kim, H. (2017). Real options analysis for renewable energy investment decisions in developing countries. Renewable and Sustainable Energy Reviews, 75, 918-926. https://doi.org/10.1016/j.rser.2016.11.073
Landis, J. R., & Koch, G. G. (1977). The measurement of observer agreement for categorical data. Biometrics, 159-174.
Le, H. T. T., Tran, V. T., Nguyen, N. T. P., Ngo, N. S., & Huynh, T. L. D. (2018). The influence of peg and F_Score on stock return by valued investment portfolios: Empirical evidence from Vietnam. Asian Economic and Financial Review, 8(3), 366. https://doi.org/10.18488/journal.aefr.2018.83.366.377
Lee, I., & Lee, K. (2015). The Internet of Things (IoT): Applications, investments, and challenges for enterprises. Business Horizons, 58(4), 431-440. https://doi.org/10.1016/j.bushor.2015.03.008
Lindemeyer, R. M. (2018). Aplicação da teoria de opções reais na avaliação de um complexo eólico. 2018. Dissertação de Mestrado. Escola de Economia de São Paulo. Fundação Getúlio Vargas, São Paulo.
Liu, X., & Ronn, E. I. (2020). Using the binomial model for the valuation of real options in computing optimal subsidies for Chinese renewable energy investments. Energy Economics, 104692. https://doi.org/10.1016/j.eneco.2020.104692
Lopes, C. C., Blank, F. F., Thomé, A. M. T., & Valladão, D. M. (2019). Investment decisions in an oil refinery in Brazil under a real option approach. Brazilian Journal of Operations & Production Management, 16(3), 375-386. https://doi.org/10.14488/BJOPM.2019.v16.n3.a2
Manocha, N., & Babovic, V. (2018). Sequencing infrastructure investments under deep uncertainty using real options analysis. Water, 10(2), 229. https://doi.org/10.3390/w10020229
Marconi, M., & Lakatos, E. (2010). Fundamentos de metodologia científica: Técnicas de pesquisa 7. ed. São Paulo: Atlas.
Marfori, I. A. V., Culaba, A. B., Ubando, A. T., Almonares, R. A., & Chen, W. H. (2019, June). Determining the Sustainability of a Community Micro Hydro Power System using Real Options Analysis. In IOP Conference Series: Earth and Environmental Science (Vol. 268, No. 1, p. 012108). IOP Publishing.: https://doi.org/10.1088/1755-1315/268/1/012108
Marshall, C. M. (2015). Isolating the systematic and unsystematic components of a single stock’s (or portfolio’s) standard deviation. Applied Economics, 47(1), 1-11. https://doi.org/10.1080/00036846.2014.959652
Martinez, I. M., Batistela, G. C., & Simões, D. (2019). Strategic flexibilities: valuation of a company with the application of the Real Options Theory. Brazilian Journal of Operations & Production Management, 16(4), 650-658. https://doi.org/10.14488/BJOPM.2019.v16.n4.a10
Mast, J. (2007). Agreement and kappa-type indices. The American Statistician, 61(2), 148-153. https://doi.org/10.1198/000313007X192392
McHugh, M. L. (2012). Interrater reliability: the kappa statistic. Biochemia Medica, 22(3), 276-282. Retrieved from: https://hrcak.srce.hr/89395
Merton, R. C. (1973). Theory of rational option pricing. The Bell Journal of Economics and Management Science, 141-183.
Ministério de Minas e Energia. (2019). Plano decenal de expansão de energia 2029. Recuperado de: http://www.mme.gov.br/c/document_library/get_file?uuid=a18d104e-4a3f-31a8-f2cf-382e654dbd20&groupId=36189 .
Morreale, A., Robba, S., Nigro, G. L., & Roma, P. (2017). A real options game of alliance timing decisions in biopharmaceutical research and development. European Journal of Operational Research, 261(3), 1189-1202. https://doi.org/10.1016/j.ejor.2017.03.025
Mubashar, A., & Tariq, Y. B. (2019). Capital budgeting decision-making practices: evidence from Pakistan. Journal of Advances in Management Research. https://doi.org/10.1108/JAMR-07-2018-0055
Mun, J. (2016). Real options analysis: Tools and techniques for valuing strategic investments and decisions with integrated risk management and advanced quantitative decision analytics. Thompson-Shore and ROV Press.
Nascimento, R. L. (2017). Energia solar no Brasil: situação e perspectivas. Brasília. Câmara dos Deputados.
Nicolas, P. R. (2017). Scala for machine learning: data processing, ML algorithms, smart analytics, and more. Packt Publishing Ltd.
Nicholls, G. M., Lewis, N. A., Zhang, L., & Jiang, Z. (2014). Breakeven volatility for real option valuation. Engineering Management Journal, 26(2), 49-61 https://doi.org/10.1080/10429247.2014.11432010
Operador Nacional do Sistema. (2019) Boletim mensal de geração de energia. http://www.ons.org.br/paginas/resultados-da-operacao/boletins-da-operacao .
Park, S. H., Goo, J. M., & Jo, C. H. (2004). Receiver operating characteristic (ROC) curve: practical review for radiologists. Korean journal of radiology, 5(1), 11-18. https://doi.org/10.3348/kjr.2004.5.1.11
Perdomo, E. A. H., & Mun, J. (2017). Active management in state-owned energy companies: Integrating a real options approach into multicriteria analysis to make companies sustainable. Applied energy, 195, 487-502. https://doi.org/10.1016/j.apenergy.2017.03.068
Pereira, E. B., Martins, F. R., de Abreu, S. L., & Rüther, R. (2006). Atlas brasileiro de energia solar (Vol. 1). São José dos Campos: Inpe.
Pereira, F.P. Jr. (2019). Teoria das opções reais para avaliar investimentos em disposição de rejeitos com menor impacto socio ambiental: uma análise comparativa coma metodologia do fluxo de caixa descontado na Samarco Mineração S/A. Dissertação de Mestrado. Programa de Pós-Graduação da Fundação Dom Cabral, Belo Horizonte, Brasil.
Prieto, D., Swinnen, N., Blanco, L., Hermosilla, D., Cauwenberg, P., Blanco, Á., & Negro, C. (2016). Drivers and economic aspects for the implementation of advanced wastewater treatment and water reuse in a PVC plant. Water Resources and Industry, 14, 26-30. https://doi.org/10.1016/j.wri.2016.03.004
Pivorienė, A. (2017). Real options and discounted cash flow analysis to assess strategic investment projects. Economics and Business, 30(1), 91-101. https://doi.org/10.1515/eb-2017-0008
Pless, J., Arent, D. J., Logan, J., Cochran, J., & Zinaman, O. (2016). Quantifying the value of investing in distributed natural gas and renewable electricity systems as complements: Applications of discounted cash flow and real options analysis with stochastic inputs. Energy Policy, 97, 378-390. https://doi.org/10.1016/j.enpol.2016.07.002
Portaria nº 236, de 30 de maio de 2014. Determina as diretrizes para a realização dos leilões de energia de reserva a serem promovidos direta ou indiretamente pela ANEEL. https://www2.aneel.gov.br/aplicacoes/editais_geracao/documentos/Portaria%20n%C2%BA%20236%20de%202014%20compilada_LER2014.pdf
Posen, H. E., Leiblein, M. J., & Chen, J. S. (2018). Toward a behavioral theory of real options: Noisy signals, bias, and learning. Strategic Management Journal, 39(4), 1112-1138. https://doi.org/10.1002/smj.2757
Rambaud, S. C., & Pérez, A. M.S. (2019). A mathematical approach to the deferment option of an investment project. Managerial and Decision Economics, 40(6), 639-650. https://doi.org/10.1002/mde.3035
Resolução Normativa nº 780, de 25 de julho de 2017. Estabelece critérios para o Operador Nacional do Sistema desempenhar as atividades de gestão orçamentária, e dá outras providências. https://www.in.gov.br/materia/-/asset_publisher/Kujrw0TZC2Mb/content/id/19201893/do1-2017-07-28-resolucao-normativa-n-780-de-25-de-julho-de-2017-19201741
Resolução Normativa nº 882, de 20 de abril de 2020. Altera o submódulo 12.3 dos procedimentos de regularização tarifária-PRORET e dá outras providências. https://www.in.gov.br/web/dou/-/resolucao-normativa-n-882-de-20-de-abril-de-2020-253756742
Ribeiro, S.S.; Silva, A.F.A, Jr. (2016). Avaliação de Políticas Promovidas pela ANEEL para Incentivo da Geração de Energia Elétrica por Fonte Solar. In: Encontro da Associação dos Programas de pós-Graduação em Administração, XL., 2016. Costa do Sauípe-BA. Anais... Costa do Sauípe-BA: ENANPAD, 2016
Rocha, A. B. D. S. (2008). O dilema do prisioneiro e a ineficiência do método das opções reais. Revista de Administração Contemporânea, 12(2), 507-531. https://doi.org/10.1590/S1415-65552008000200010
Ruaro, L.J., & Etges, A.P.B. (2018). Avaliação econômica e de risco de um projeto de implementação de um sistema solar fotovoltaico. In: VII Congresso Brasileiro de Energia Solar– CBES. Anais... Gramado, Brasil, ABENS, 2018.
Schachter, J. A., & Mancarella, P. (2016). A critical review of Real Options thinking for valuing investment flexibility in Smart Grids and low carbon energy systems. Renewable and Sustainable Energy Reviews, 56, 261-271. https://doi.org/10.1016/j.rser.2015.11.071
Schwartz, E. (2013). The real options approach to valuation: Challenges and opportunities. Latin American Journal of Economics, 50(2), 163-177.
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x
Silva, A.F.A. Jr., & Ribeiro, S. S. (2016). Avaliação de Leilões de Energia Solar Utilizando Opções Reais. In: X Congresso Brasileiro de Planejamento Estratégico – CBPE, Anais... Gramado, Brasil, ABENS.
Silva, A.F.A., Jr., Ribeiro, S. S., & Quintella, V. M. (2018). Evaluation of Brazilian Auctions for Photovoltaic Projects Using Traditional and Real Option Approaches. SSRN Electronic Journal. Available at: https://www.researchgate.net/publication/ 323704278.
Silva, G. P. D. (2018). Desenho de pesquisa. Enap.
Smith, J. E. (2005). Alternative Approaches for Solving Real-Options Problems: (Comment on Brandão et al. 2005). Decision Analysis, 2(2), 89-102. https://doi.org/10.1287/deca.1050.0041
Tang, B. J., Zhou, H. L., Chen, H., Wang, K., & Cao, H. (2017). Investment opportunity in China's overseas oil project: An empirical analysis based on real option approach. Energy Policy, 105, 17-26. https://doi.org/10.1016/j.enpol.2017.02.023
Torinelli, V. H., Silva, A. F. A, Jr., & Andrade, J. C. S. (2018). Wind power energy in Brazil: public financing and future perspectives. Latin American Journal of Management for Sustainable Development, 4(1), 41-54. https://doi.org/10.1504/LAJMSD.2018.091325
Tubetov, D. (2013). Investment behavior in agriculture-an analysis of the explanatory potential of the real options approach. Thesis of Pdh Faculty of Agricultural Sciences, Georg-August-University Göttingen, Germany, 2013. 87 p.
Turan, S. S., & Kılıç, E. (2018). X-Capm revisited: the institutional extrapolative capital asset pricing model (IX-CAPM). https://doi.org/10.15604/ejbm.2018.06.02.001
Vasseur, J. P., Sanchez, N. M. P., & Escobar, M. E. M. (2019). Real Options Volatility: Literature Review and a Case of Application in the Colombian Oil Sector. Revista de Métodos Cuantitativos para la Economía y la Empresa, 27, 136-155. https://www.upo.es/revistas/index.php/RevMetCuant/article/view/2820
Viana, A. G., & Ramos, D. S. (2018). Outcomes from the first large-scale solar PV auction in Brazil. Renewable and Sustainable Energy Reviews, 91, 219–228. https://doi.org/10.1016/j.rser.2018.04.003
Visconti, R. M. (2020). The Valuation of Intangible Assets: An Introduction. In The Valuation of Digital Intangibles (pp. 9-61). Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-36918-7_2
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Revista de Administração da UFSM
This work is licensed under a Creative Commons Attribution 4.0 International License.
This journal remains the copyright holders of articles published. In order to be published, authors must sign the Copyrights Letter, which is sent to the authors by e-mail, thus granting rights, including on translation, to ReA/UFSM. The journal grants third parties the right to use, reproduce, and share the article according to the Creative Commons license agreement (CC-BY 4.0), as stated in the article’s PDF documents.
