Masterclass: Valuing generation assets using Monte Carlo simulation

In this Masterclass, Les Clewlow, James Lujun Liu, Doug Meador, Ron Sobey and Chris Strickland describe the use of Monte Carlo methods for valuing generation assets in more detail. In particular, they discuss the appropriate price models to use and how to develop path-dependent dispatch algorithms to handle the operational constraints of these assets

In the previous article of this Masterclass series we provided an overview of the difficulties associated with valuing a generation asset and described a number of different techniques for valuing generation assets as real options. In addition, we also applied one of the techniques, analytic spark-spreads, to value an asset, demonstrating that it was difficult to incorporate all the operational constrains that were needed to describe the asset. In particular, the incorporation of start-up costs