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Interconnectors are assets that gives the owner the option to transmit electricity between two locations. But how does the owner calculate the value of this option?
An accurate valuation of generation assets and their associated risks is crucial.It provides an accurate view of a portfolio's current value and enhances the ability of the owner to quantify and hedge the risk associated with the asset. Given the ability to run (or not run), it has become common place to view generation units as "real options" when attempting to value them; however, this can run into strong headwinds attempting to evaluate all the associated physical constraints