Profitability and Risk Analysis of the Solar Power Generation Project by the Korea Rural Community Corporation

Taehoo Kim

Journal of Rural Development/Nongchon-Gyeongje, 2019, vol. 42, issue 4

Abstract: The Korean government's energy policy focuses on the spreading of renewable energy. Following this policy, the Korea Rural Community Corporation (KRCC) is promoting the renewable energy generation project with the budget of the Ministry of Agriculture, Food and Rural Affairs (MAFRA). It has plans to use the revenues from power generation as an agricultural infrastructure maintenance cost. This study discusses the effectiveness of the financial investment of the MAFRA by analyzing the profitability and risk of the solar power generation project pursued by KRCC. In order to analyze the profitability and risk, we set the systemic marginal price (SMP) and the price of the renewable energy certificate (REC) as random variables. Then, we perform the simulation with Gaussian Copula to consider the correlations of each random variable. As a result, the average power generation profit of the project is 1.78 billion Won, which implies a high earning rate of 4.91%, considering the total investment cost. In the Value at Risk analysis for the risk of the project, the profit from VaR(1) is 0.46 billion won, and the profit rate is 1.26%, implying that stable profits are generated despite the weak market conditions for the solar power generation.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jordng:330776

DOI: 10.22004/ag.econ.330776

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