Robust Decisions and Deep Uncertainty

An Application of Real Options to Public and Private Investment in Hydrogen and Fuel Cell Technologies

by Sergej Mahnovski

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This dissertation assesses the prospects for private-sector investment in hydrogen and fuel cell technologies using an innovative application of real options analysis. Specifically, the dissertation considers the decision faced by natural gas utilities over whether, how, and to what extent they should invest in projects that could be of value if a hydrogen energy market develops in the future. This is a problem of investment under uncertainty when there is little prior information available and where the investment itself could affect the future development of this market. The ultimate goal of the dissertation is to identify investment strategies that are robust against alternative futures and assess the trade-offs of various policy instruments.

Table of Contents

  • Chapter One


  • Chapter Two

    Literature Review on Real Options and Investment under Uncertainty

  • Chapter Three

    The Role of Public and Private Sectors in Hydrogen Investment

  • Chapter Four

    A Case Study of Three Natural Gas Distribution Utilities

  • Chapter Five

    Potential Hydrogen Markets and Public Policies

  • Chapter Six

    Real Options Model

  • Chapter Seven


  • Chapter Eight


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This document was submitted as a dissertation in September 2006 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Steven Popper (Chair), Mark Bernstein, and James Dewar.

This report is part of the RAND Corporation Dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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