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Report, 2009

Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix

Di, Corato Luca; Moretto, Michele


In a continuous-time framework we study the technology and investment choice problem of a continuous co-digestion biogas plant dealing with randomly fluctuating relative convenience of input factor costs. Input factors enter into the productive process together mixed according to a given initial rule. Being inputs relative convenience stochastically evolving, a successive revision of the initial rule may be desirable. Hence, when the venture starts the manager may or may not install a flexible technology allowing for such option. Investment is irreversible and flexibility is costly. The problem is solved determining in the light of future prospects the optimal revision and then playing backward fixing the investment timing rule


factor proportions; technological choice; flexibility; real options; alternative energy source

Published in

CESifo Working Paper Series
2009, number: 2729
Publisher: CESifo Group Munich

Authors' information

Di Corato, Luca
Swedish University of Agricultural Sciences, Department of Economics
Moretto, Michele

UKÄ Subject classification

Social Sciences
Renewable Bioenergy Research
Economics and Business

URI (permanent link to this page)