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Table 2 Description of variables and parameters

From: A real options approach to renewable electricity generation in the Philippines

Notation Description
C D Annual marginal cost of electricity production using diesel, in US$
C R Annual marginal cost of electricity production using renewable energy, in US$
I R Investment cost for renewable energy, in US$
NPV R Net present value of investing in RE, in US$
P D, t Stochastic price of diesel, in US$/barrel
P E Electricity price, in US$/MWh
Q D Quantity of diesel needed to produce Q E , in barrels
Q E Quantity of electricity produced, in MWh
V D, t Option value of investment at each price of diesel, D, at each period of investment, t, in US$
\( {\mathbb{E}\mathrm{NPV}}_{D,t} \) Expected net present value of continuing diesel for electricity generation, in US$
\( {\mathbb{i}}_{\tau \le T} \) Indicator equal to 1 if switching to RE is made, otherwise, equal to 0
π D, t Profit of using diesel for electricity generation from initial period of investment, 0, to period of switching to RE, τ, in US$
T Total period of investment
tax Externality tax for using diesel
ρ Discount factor
τ Period of switching from diesel to RE