| In this paper, we use Least-Squares Monte Carlo (LSMC) simulation approach to value a fuel-switching unit, which can convert different fuels, such as natural gas, fuel oil, to electricity. The fuel-switching potential between gas and oil is studied based on simulated electricity price, natural gas price and fuel oil price. The simulation results show that fuel-switching capability may increase asset value by 10\%, and that asset valuation by LSMC is much more efficient than the lattice model. Moreover we show that the asset value of a generation unit is significantly related to the ability to make a fuel choice and the correlation coefficients between gas price and oil price. |
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