Making optimal investment decisions for energy service companies under uncertainty: A case study

Qianli Deng, Xianglin Jiang, Limao Zhang and Qingbin Cui

Energy, 2015, vol. 88, issue C, 234-243

Abstract: Varied initial energy efficiency investments would result in different annual energy savings achievements. In order to balance the savings revenue and the potential capital loss through EPC (Energy Performance Contracting), a cost-effective investment decision is needed when selecting energy efficiency technologies. In this research, an approach is developed for the ESCO (Energy Service Company) to evaluate the potential energy savings profit, and thus make the optimal investment decisions. The energy savings revenue under uncertainties, which are derived from energy efficiency performance variation and energy price fluctuation, are first modeled as stochastic processes. Then, the derived energy savings profit is shared by the owner and the ESCO according to the contract specification. A simulation-based model is thus built to maximize the owner's profit, and at the same time, satisfy the ESCO's expected rate of return. In order to demonstrate the applicability of the proposed approach, the University of Maryland campus case is also presented. The proposed method could not only help the ESCO determine the optimal energy efficiency investments, but also assist the owner's decision in the bidding selection.

Keywords: Energy service companies; Energy efficiency investment; Contract design; Monte-Carlo simulation; Uncertainty modeling (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544215005381
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:88:y:2015:i:c:p:234-243

DOI: 10.1016/j.energy.2015.05.004

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().