Least Squares Monte Carlo Simulation-Based Decision-Making Method for Photovoltaic Investment in Korea

Jungmin An, Dong-Kwan Kim, Jinyeong Lee and Sung-Kwan Joo
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Jungmin An: School of Electrical Engineering, Anam Campus, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul 02841, Korea
Dong-Kwan Kim: School of Electrical Engineering, Anam Campus, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul 02841, Korea
Jinyeong Lee: Korea Electrotechnology Research Institute, 138, Naesonsunhwan-ro, Uiwang-si 16029, Korea
Sung-Kwan Joo: School of Electrical Engineering, Anam Campus, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul 02841, Korea

Sustainability, 2021, vol. 13, issue 19, 1-14

Abstract: Solar power for clean energy is an important asset that will drive the future of sustainable energy generation. As interest in sustainable energy increases with Korea’s renewable energy expansion plan, a strategy for photovoltaic investment (PV) is important from an investor’s point of view. Previous research primarily focused on assessing and analyzing the impact of the volatility but paid little attention to the modeling decision-making project to obtain the optimal investment timing. This paper utilizes a Least Squares Monte Carlo-based method for determining the timing of PV plant investment. The proposed PV decision-making method is designed to simulate the total PV generation revenue period with all uncertain PV price factors handled before determining the optimal investment time. The numerical studies with nine different scenarios considering system marginal price (SMP) and renewable energy certificate (REC) spot market price in Korea demonstrated how to determine the optimal investment time for different PV capacities. Therefore, the proposed method can be used as a decision-making tool to provide PV investors with information on the best time to invest in the renewable energy market.

Keywords: investment planning; photovoltaic power; renewable energy certificate (REC); Least Squares Monte Carlo (LSMC); optimal investment timing (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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