In the last decades Real Options Valuation (ROV) has been gaining a leading role among methods of economic evaluation and risk analysis of projects. This method enables valuation of managerial flexibility which includes postponing investments and reformulating of operating strategies of companies. By doing this, the method delivers higher project values than derived from the classical discount approaches, such as NPV. The value of flexibility may be of lower or greater importance - depending on types, configuration and sequence of occurring real options. Common methods of real options valuation are built on lattice models which approximate continuous stochastic process. One of the most popular techniques used for real options valuation - a marketed asset disclaimer approach (MAD) - is based on the binomial tree. The paper presents valuation of the mineral project with three simultaneous options: option-to-expand, option-to-contract and option-to-abandon.

Because of the value of time, investors are interested in obtaining economic benefits rather early and at a highest return. But some investing opportunities, e.g. mineral projects, require from an investor to freeze their capital for several years. In exchange for this, they expect adequate remuneration for waiting, uncertainty and possible opportunities lost. This compensation is reflected in the level of interest rate they demand. Commonly used approach of project evaluation – the discounted cash flow analysis – uses this interest rate to determine present value of future cash flows. Mining investors should worry about project’s cash flows with greater assiduousness – especially about those arising in first years of the project lifetime. Having regard to the mining industry, this technique views a mineral deposit as complete production project where the base sources of uncertainty are future levels of economic-financial and technical parameters. Some of them are more risky than others – this paper tries to split apart and weigh their importance by the example of Polish hard coal projects at the feasibility study. The work has been performed with the sensitivity analysis of the internal rate of return. Calculations were made using the ‘bare bones’ assumption (on all the equity basis, constant money, after tax, flat price and constant operating costs), which creates a good reference and starting point for comparing other investment alternatives and for future investigations. The first part introduces with the discounting issue; in the following sections the paper presents data and methods used for spinning off risk components from the feasibility-stage discount rate and, in the end, some recommendations are presented.

The sustainable management of energy production and consumption is one of the main challenges of the 21st century. This results from the threats to the natural environment, including the negative impact of the energy sector on the climate, the limited resources of fossil fuels, as well as the unstability of renewable energy sources – despite the development of technologies for obtaining energy from the: sun, wind, water, etc. In this situation, the efficiency of energy management, both on the micro (dispersed energy) and macro (power system) scale, may be improved by innovative technological solutions enabling energy storage. Their effective implementation enables energy storage during periods of overproduction and its use in the case of energy shortages. These challenges cannot be overestimated. Modern science needs to solve various technological issues in the field of storage, organizational problems of enterprises producing electricity and heat, or issues related to the functioning of energy markets. The article presents the specificity of the operation of a combined heat and power plant with a heat accumulator in the electricity market while taking the parameters affected by uncertainty into account. It was pointed out that the analysis of the risk associated with energy prices and weather conditions is an important element of the decision-making process and management of a heat and power plant equipped with a cold water heat accumulator. The complexity of the issues and the number of variables to be analyzed at a given time are the reason for the use of advanced forecasting methods. The stochastic modeling methods are considered as interesting tools that allow forecasting the operation of an installation with a heat accumulator while taking the influence of numerous variables into account. The analysis has shown that the combined use of Monte Carlo simulations and forecasting using the geometric Brownian motion enables the quantification of the risk of the CHP plant’s operation and the impact of using the energy store on solving uncertainties. The applied methodology can be used at the design stage of systems with energy storage and enables carrying out the risk analysis in the already existing systems; this will allow their efficiency to be improved. The introduction of additional parameters of the planned investments to the analysis will allow the maximum use of energy storage systems in both industrial and dispersed power generation.

Taking the importance of time and risk into account has a significant impact on the value of

investment projects. Investments in the energy sector are long-term projects and, as such, are burdened

with uncertainty associated with the long-term freezing of capital and obtaining the expected

return. In the power industry, this uncertainty is increased by factors specific to the sector,

including in particular changes in the political and legal environment and the rapid technological

development. In the case of discounted cash flow analysis (DCF), commonly used for assessing the

economic efficiency of investments, the only parameter expressing investor uncertainty regarding

investment opportunities is the discount rate, which increases with the increasing risk of the project.

It determines the value of the current project, thus becoming an important criterion affecting

investors’ decisions. For this reason, it is of great importance for the assessment of investment

effectiveness. This rate, usually in the form of the weighted average cost of capital (WACC), generally

includes two elements: the cost of equity capital and borrowed capital. Due to the fluctuant

relationship between these two parameters in project financing, performing a WACC analysis in

order to compare the risks associated with the different technologies is not completely justified.

A good solution to the problem is to use the cost of equity. This article focuses on the analysis of this

cost as a measure of risk related to energy investments in the United States, Europe and worldwide.

Finite fossil fuel resources, as well as the instability of renewable energy production, make the sustainable management of energy production and consumption some of the key challenges of the 21st century. It also involves threats to the state of the natural environment, among others due to the negative impact of energy on the climate. In such a situation, one of the methods of improving the efficiency of energy management – both on the micro (dispersed energy) and macro (power system) scale, may be innovative technological solutions that enable energy storage. Their effective implementation will allow it to be collected during periods of overproduction and to be used in situations of scarcity. These challenges cannot be overestimated - modern science has a challenge to solve various types of problems related to storage, including the technology used or the control/ /management of energy storage. Heat storage technologies, on which research works are carried out regarding both storage based on a medium such as water, as well as storage using thermochemical transformations or phase-change materials. They give a wide range of applications and improve the efficiency of energy systems on both the macro and micro scale. Of course, the technological properties and economic parameters have an impact on the application of the chosen technology. The article presents a comparison of storage parameters or heat storage methods based on different materials with specification of their work parameters or operating costs.

A lot of interest has recently been put into the so-called ‘virtual cryptographic currencies’, commonly known as cryptocurrencies, along with its surrounding market. The blockchain technology that stands behind them is also becoming increasingly popular. From the perspective of maintaining energy security, an important issue is the process of mining individual cryptocurrencies, which is associated with very high energy consumption. This operation is usually related to the approval of new blocks in the blockchain network and attaching them to the chain. This process is carried out through performing complex mathematical operations by various devices, which in turn require high power and respectively consume a lot of energy. The impact of cryptocurrency miners on the power and energy demand level might gradually increase over time, therefore this issue shouldn’t be ignored. Comparing the above information in parallel with the growing need for providing demand side response (DSR) services in the Polish Power System, raises the question whether devices used for mining cryptocurrencies can be used for the purpose of balancing the power system. This paper presents an analysis of the possibility to provide the demand side response services by groups of cryptocurrency miners users. The analysis was carried out taking basic functional, technological and economical aspects of these devices’ operations into account.

With the upcoming implementation of the centralized capacity market in Poland, capacity auctions will be organized where domestic power companies will offer their available capacities. It is assumed that bidding will be auctioned according to the so called descending clock auction system with uniform-price (Pay-as-Clear), which will lead to the market equilibrium price. Some analysts, however, are of the view that it is more appropriate to organize capacity auctions in the Pay-as-Bid formula, as this system should lead to lower prices that those of Pay-as-Clear, hence lower costs of capacity purchase. However, this opinion does not confirm the practice – theoretical considerations do not take into account such important factors as the behavior of market players and the tendency of bidders to accept a higher risk or the lack of access to advanced analyses, and thus better information for all market participants. This paper presents a hypothetical calculation of the prices in the centralized capacity market using Monte Carlo simulations. The results of the study confirm that the price level for the Pay-as-Bid system, due to the asymmetry of information and the level of concentration of the power generation sector in Poland would lead to higher prices than for the Pay-as-Clear system on average by approximately 2.5%. The implementation of the PAB system would, therefore, be less efficient to electricity consumers.