International Journal of Energy and Power Engineering

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Real Options: An Evaluation Tool for a Photovoltaic System for Self-consumption

Received: Oct. 17, 2018    Accepted: Nov. 01, 2018    Published: Dec. 14, 2018
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Abstract

The use of renewable sources to produce energy is good for the planet and has economic value, that is, investing in the produce of green energy can be economically viable. This paper aims to conduct an evaluation, using real options tools, of a photovoltaic (PV) system, for self-consumption, at the Campus of Polytechnic Institute of Viseu, Portugal. A PV system produces electricity from sun and its investment can be viable, particularly in sunny countries like Portugal. This viability comes from the rapid recovery of the investment, since the energy produced is no longer bought to the electrical network. The utilization of real options, in this study, namely the decision trees, allows integrating uncertainty sources and operational flexibility. In this work, we considered the price of electricity tariff and the value of the initial investment as uncertain values. The operational flexibility is integrated by considering the options “invest”, “defer” and “not invest” in the PV system, for self-consumption. The results suggest that the Polytechnic Institute of Viseu should invest in a PV system, for self-consumption. The use of solar energy, especially in countries with high sun expose, such as Portugal, is economically viable.

DOI 10.11648/j.ijepe.20180705.12
Published in International Journal of Energy and Power Engineering ( Volume 7, Issue 5, October 2018 )
Page(s) 59-65
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Real Options, Decision Trees, Photovoltaic System, Self-consumption, Energetic Sustainability

References
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[2] G. E. Mathews and E. H. Mathews, "Household photovoltaics — A worthwhile investment?" 2016 International Conference on the Domestic Use of Energy (DUE), Cape Town, 2016, pp. 1-7. doi: 10.1109/DUE.2016.7466716.
[3] K. T. Yeo and F. Qiu, “The value of management flexibility - a real option approach to investment evaluation.” International Journal of Project Management vol. 21, pp. 243-250, 2003.
[4] M. Mancini, R. Sala, D. Tedesco and A. Travaglini, "A real options investment model for the evaluation of wind and photovoltaic plants," 2016 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM), Bali, 2016, pp. 1101-1105. doi: 10.1109/IEEM.2016.7798048.
[5] J. D. Pereira, Master Thesis: Instalações Solares Fotovoltaicas para Autoconsumo: Análise e Perspetivas de Aplicação. Porto: Faculdade de Engenharia da Universidade do Porto, 2016.
[6] Decree-Law no. 153/2014, Diário da República n.º 202/2014, Série I de 2014-10-20.
[7] F. Pinto, Ordem Engenheiros, 2015. Obtained from http://www.ordemengenheiros.pt/fotos/dossier_artigo/20151120_filipepinto_7615808675660254a2675c.pdf
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[15] O. Lint and E. Pennings, “An option approach to the new product development process: a case study at Philips Electronics.” R&D Management, vol. 31, no. 2, pp. 163-172, 2001.
[16] E. Schwartz and C. Zozaya-Gorostiza, “Investment Under Uncertainty in Information Technology: Acquisition and Development Projects.” Management Science vol. 49, no. 1, pp. 57-70, 2003.
[17] J. Lee and D. Paxson, “Valuation of R&D real American sequential exchange options.” R&D Management, vol. 21, no. 2, pp. 191-201, 2001.
[18] J. Fialho, PhD Thesis: Avaliação de Projetos de Investigação e Desenvolvimento na Área das Telecomunicações, Faculdade de Economia da Universidade de Coimbra, 2013.
[19] A. Gomes, A. P. Pinto and J. Fialho, “Avaliação Económica de um Sistema de Produção Fotovoltaico para Autoconsumo”, Fronteiras: Journal of Social, Technological and Environmental Science, v. 6, n. 3, pp. 83-98, 2017.
[20] REN - Redes Energéticas Nacionais, Síntese anual 2011 - 2015 - REN. Obtido de REN - Redes Energéticas Nacionais, 2015. Obtained from http://www.mercado.ren.pt/PT/Electr/InfoMercado/PressReleases/BibInfAnual/MercadoEletricidadeSinteseAnual2011_2015.pdf
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  • APA Style

    Joana Fialho, Pedro Pinto, Ana Lúcia Gomes. (2018). Real Options: An Evaluation Tool for a Photovoltaic System for Self-consumption. International Journal of Energy and Power Engineering, 7(5), 59-65. https://doi.org/10.11648/j.ijepe.20180705.12

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    ACS Style

    Joana Fialho; Pedro Pinto; Ana Lúcia Gomes. Real Options: An Evaluation Tool for a Photovoltaic System for Self-consumption. Int. J. Energy Power Eng. 2018, 7(5), 59-65. doi: 10.11648/j.ijepe.20180705.12

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    AMA Style

    Joana Fialho, Pedro Pinto, Ana Lúcia Gomes. Real Options: An Evaluation Tool for a Photovoltaic System for Self-consumption. Int J Energy Power Eng. 2018;7(5):59-65. doi: 10.11648/j.ijepe.20180705.12

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  • @article{10.11648/j.ijepe.20180705.12,
      author = {Joana Fialho and Pedro Pinto and Ana Lúcia Gomes},
      title = {Real Options: An Evaluation Tool for a Photovoltaic System for Self-consumption},
      journal = {International Journal of Energy and Power Engineering},
      volume = {7},
      number = {5},
      pages = {59-65},
      doi = {10.11648/j.ijepe.20180705.12},
      url = {https://doi.org/10.11648/j.ijepe.20180705.12},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijepe.20180705.12},
      abstract = {The use of renewable sources to produce energy is good for the planet and has economic value, that is, investing in the produce of green energy can be economically viable. This paper aims to conduct an evaluation, using real options tools, of a photovoltaic (PV) system, for self-consumption, at the Campus of Polytechnic Institute of Viseu, Portugal. A PV system produces electricity from sun and its investment can be viable, particularly in sunny countries like Portugal. This viability comes from the rapid recovery of the investment, since the energy produced is no longer bought to the electrical network. The utilization of real options, in this study, namely the decision trees, allows integrating uncertainty sources and operational flexibility. In this work, we considered the price of electricity tariff and the value of the initial investment as uncertain values. The operational flexibility is integrated by considering the options “invest”, “defer” and “not invest” in the PV system, for self-consumption. The results suggest that the Polytechnic Institute of Viseu should invest in a PV system, for self-consumption. The use of solar energy, especially in countries with high sun expose, such as Portugal, is economically viable.},
     year = {2018}
    }
    

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    AU  - Joana Fialho
    AU  - Pedro Pinto
    AU  - Ana Lúcia Gomes
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    DO  - 10.11648/j.ijepe.20180705.12
    T2  - International Journal of Energy and Power Engineering
    JF  - International Journal of Energy and Power Engineering
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    AB  - The use of renewable sources to produce energy is good for the planet and has economic value, that is, investing in the produce of green energy can be economically viable. This paper aims to conduct an evaluation, using real options tools, of a photovoltaic (PV) system, for self-consumption, at the Campus of Polytechnic Institute of Viseu, Portugal. A PV system produces electricity from sun and its investment can be viable, particularly in sunny countries like Portugal. This viability comes from the rapid recovery of the investment, since the energy produced is no longer bought to the electrical network. The utilization of real options, in this study, namely the decision trees, allows integrating uncertainty sources and operational flexibility. In this work, we considered the price of electricity tariff and the value of the initial investment as uncertain values. The operational flexibility is integrated by considering the options “invest”, “defer” and “not invest” in the PV system, for self-consumption. The results suggest that the Polytechnic Institute of Viseu should invest in a PV system, for self-consumption. The use of solar energy, especially in countries with high sun expose, such as Portugal, is economically viable.
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Author Information
  • Center for Studies in Education, Technologies and Health, Polytechnic Institute of Viseu, Viseu, Portugal

  • Center for Studies in Education, Technologies and Health, Polytechnic Institute of Viseu, Viseu, Portugal

  • Center for Studies in Education, Technologies and Health, Polytechnic Institute of Viseu, Viseu, Portugal

  • Section