We propose a DAO that requires an initial investment
to allow the entry of the renewable energy generator into
the platform, which creates new tokens and promotes quarterly sales auctions that will make available a number
of tokens to the market. We assume that the renewable energy generator
investment takes place at time 0 and that the supply of
RECs to the market (St) will occur for 8 quarters (or 2
years). Our model also assumes that the generator has
the flexibility to invest now or in one year to enter the
platform, considering the energy generated in one year
by a single typical 4MW wind turbine. This is equivalent
to the generator having a European option to defer their
investment for one year.
To understand the logic of a European call option,
which in this research is represented by the option to defer
the investment, we present in Figure 2 a simple example
of how such an option can be calculated with a binomial
tree. In this example, we assume that the investment
(US$ 3,000) in a project can be deferred. With this, we
can wait for the uncertainty about its future value (high
= US$ 5,500 and low = US$ 2,200) to be resolved before
deciding to invest or not. In this sense, the decision
would be to invest in the project in the upside scenario.
However, in the downside scenario, the section is not to
invest in the project Note that the option to defer affects the risk of the
project, preventing it from having a negative outcome.
Thus, the risk of the project with this flexibility is lower.
Therefore, the calculation of the option value requires
specific methods and cannot be determined through
the DCF method. This example is close to the model we
propose in the following section.                      From the definition of the initial demand and its
growth rate in Table 1, we determine the total demand
for RECs for the next two years (DT = 151,267 MWh)
using equation 1. After this, we calculate the generator’s
investment (I = US$ 226,900.25) using equation 4. Then,
in order to define the generator’s revenue, we model the
multiplicative demand shock (Ct). For this, we calculate by
numerical methods the risk premium value (ζC = 4.70% per
quarter or 20.68% per year) considering the mathematical
equivalence between the PVs shown in equation 8. We
then determine the upside and downside values of the
binomial tree (u = 1.35 and d = 0.74) and the risk-neutral
probabilities (p = 43.05% and 1 – p = 56.95%) using
equation 9.
Using the software DPL, we model the uncertainty
for the next eight quarters, incorporating the generator’s
revenue as the cash flow of the model, as shown in
Figure A.1 (Appendix). Through this binomial tree, we
find that the generator’s NPV is equal to US$ 22,144.70.
In this calculation, we do not consider the generator’s option to defer for one year its investment, so this is the
deterministic NPV, which can also be determined using
the DCF method and equation 6.
To include this managerial flexibility in the model,
we must redesign the binomial tree, as shown in Figure
A.2 (Appendix), and consider that the generator’s
investment becomes equal to IA = US$ 239,011.22 (equation
10). Considering the option to postpone the investment
and equation 11, we find that the generator’s NPV is equal
to US$ 59,657.50. Note that the defer option is extremely
valuable, as it promoted a growth of approximately
169.40% in the generator’s NPV.