Valuing flexibility in electro-intensive industries: the case of an aluminum smelter
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| Format: | Artículo científico |
| Sprache: | en |
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Associação Brasileira de Engenharia de Produção
2016
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| _version_ | 1876461748661256192 |
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| author | Carlos de Lamare Bastian-Pinto |
| author_facet | Carlos de Lamare Bastian-Pinto |
| contents | Valuing flexibility in electro-intensive industries: the case of an aluminum smelter Carlos de Lamare Bastian-Pinto Luiz Eduardo Teixeira Brandão Luiz de Magalhães Ozório Ingeniería Switch options Aluminum industry Managerial flexibility Asymmetric switching costs Electro-intensive industries account for a significant proportion of the total industrial electricity consumption, and these industries usually possess co-generation assets, which can supply at least part of their energy needs. However, due to price uncertainty, it may be optimal for the firm to temporarily suspend production and sell the available energy. If this strategy creates value, governments can create incentives through price signals for these firms to take their plants offline and increase the supply of electricity during times of shortage. This study analyzes the case of an aluminum plant that has the choice of temporarily suspending operations and models its managerial flexibility as a bundle of European switch options. The suspension and modeling would occur under two simultaneous situations, uncertainty and asymmetric state switching costs under the real options approach, to determine whether the changes add value to the firm. The results indicate that this flexibility can add significant value to the firm. 2016 artículo científico 0103-6513 https://www.redalyc.org/articulo.oa?id=396745201003 en http://www.redalyc.org/revista.oa?id=3967 Production application/pdf Associação Brasileira de Engenharia de Produção Production (Brasil) Num.1 Vol.26 |
| format | Artículo científico |
| id | redalyc_396745201003 |
| institution | Redalyc |
| language | en |
| publishDate | 2016 |
| publisher | Associação Brasileira de Engenharia de Produção |
| spellingShingle | Valuing flexibility in electro-intensive industries: the case of an aluminum smelter Carlos de Lamare Bastian-Pinto Ingeniería Switch options Aluminum industry Managerial flexibility Asymmetric switching costs Valuing flexibility in electro-intensive industries: the case of an aluminum smelter Carlos de Lamare Bastian-Pinto Luiz Eduardo Teixeira Brandão Luiz de Magalhães Ozório Ingeniería Switch options Aluminum industry Managerial flexibility Asymmetric switching costs Electro-intensive industries account for a significant proportion of the total industrial electricity consumption, and these industries usually possess co-generation assets, which can supply at least part of their energy needs. However, due to price uncertainty, it may be optimal for the firm to temporarily suspend production and sell the available energy. If this strategy creates value, governments can create incentives through price signals for these firms to take their plants offline and increase the supply of electricity during times of shortage. This study analyzes the case of an aluminum plant that has the choice of temporarily suspending operations and models its managerial flexibility as a bundle of European switch options. The suspension and modeling would occur under two simultaneous situations, uncertainty and asymmetric state switching costs under the real options approach, to determine whether the changes add value to the firm. The results indicate that this flexibility can add significant value to the firm. 2016 artículo científico 0103-6513 https://www.redalyc.org/articulo.oa?id=396745201003 en http://www.redalyc.org/revista.oa?id=3967 Production application/pdf Associação Brasileira de Engenharia de Produção Production (Brasil) Num.1 Vol.26 |
| title | Valuing flexibility in electro-intensive industries: the case of an aluminum smelter |
| topic | Ingeniería Switch options Aluminum industry Managerial flexibility Asymmetric switching costs |
| url | https://www.redalyc.org/articulo.oa?id=396745201003 |