Investing in Photovoltaics: Timing, Plant Sizing and Smart Grids Flexibility

Marina Bertolini, Chiara D’Alpaos and Michele Moretto
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Marina Bertolini: University of Padova and Centro Studi "Giorgio Levi Cases"
Chiara D’Alpaos: University of Padova and Centro Studi "Giorgio Levi Cases"

No 2016.60, Working Papers from Fondazione Eni Enrico Mattei

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 flexibility, a real option approach is implemented. We calibrate and test the model by using data from the Italian energy market.

Keywords: Smart Grids; Renewable Energy Sources; Real Options; Prosumer (search for similar items in EconPapers)
JEL-codes: C61 D81 Q42 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-ene and nep-eur
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Working Paper: Investing in Photovoltaics: Timing, Plant Sizing and Smart Grids Flexibility (2016)
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