Do Smart Grids Boost Investment in Photovoltaics? The Prosumer Investment Decision

Chiara D'Alpaos (), Marina Bertolini and Michele Moretto
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Chiara D'Alpaos: University of Padova
Marina Bertolini: University of Padova

No 203, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: In Italy and in many EU countries, the last decade was characterized by a large development of distributed generation power plants. Their presence determined new critical issues for the design and management of the overall energy system and the electric grid due to the presence of discontinuous production sources. It is commonly agreed that contingent problems that affect local grids (e.g. inefficiency, congestion rents, power outages, etc.) may be solved by the implementation of a ?smarter? electric grid. The main feature of smarts grid is the great increase in production and consumption ?flexibility. Smart grids give producers and consumers, the opportunity to be active in the market and strategically decide their optimal production/consumption scheme. The paper provides a theoretical framework to model the prosumer?s decision to invest in a photovoltaic power plant, assuming it is integrated in a smart grid. To capture the value of managerial fl?exibility, a real option approach is implemented. We calibrate and test the model by using data from the Italian energy market.

Pages: 23 pages
Date: 2016-01
New Economics Papers: this item is included in nep-ene and nep-eur
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