No real option for solar in Ireland: A real option valuation of utility scale solar investment in Ireland

Assereto, Martina; Byrne, Julie

doi:10.1016/j.rser.2021.110892

Cited by 21 publications

(10 citation statements)

References 50 publications

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“…Applying the real options approach, this study finds higher real option values than NPV which imply a better decision to postpone the energy transition to more favorable investment conditions. This result supports previous findings [62,64,65], which found values in delaying investments in utility-scale and residential solar PV. Investment in the energy transition is largely impacted by the uncertainties in costs and revenues, hence, the timing is relevant to consider when making investment decisions in huge projects, which require high initial capital [64].…”

Section: Discussionsupporting

confidence: 92%

“…Since the NPV is more than four times more sensitive than ROV (see Table 7), there would be a threshold of electricity price when investing immediately is a better option than waiting (ROV < NPV). This is confirmed in previous studies where increasing electricity tariffs results in earlier investment in energy transition projects [60,62].…”

Section: Discussionsupporting

confidence: 89%

“…This confirms the findings from previous studies [58][59][60][61] that investment in solar PV is a viable option for the energy transition. On the contrary, some cases [62,63] found negative NPV for utility-scale and lower generation capacity solar PV. For instance, Assereto and Byrne [62] found that without policy support, investing in utility-scale solar PV might only be profitable under the best-case scenario, when technology costs are low.…”

Section: Discussionmentioning

confidence: 96%

“…On the contrary, some cases [62,63] found negative NPV for utility-scale and lower generation capacity solar PV. For instance, Assereto and Byrne [62] found that without policy support, investing in utility-scale solar PV might only be profitable under the best-case scenario, when technology costs are low. Sheha et al [63] found that two out of ten studied were promising cases, one with a solar photovoltaic plant size of 200 MW and the other with 300 MW, while lower solar penetration had negative NPVs.…”

Section: Discussionmentioning

confidence: 96%

“…Currently, the cost of solar PV is continuously declining due to technological innovations, competitive prices of solar PV and battery storage, and the learning effect [66,67]. With this trend, a firm has to wait longer to invest to the point when technology costs are low enough to make the investment more profitable [62].…”

Section: Discussionmentioning

confidence: 99%

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Will a Geopolitical Conflict Accelerate Energy Transition in Oil-Importing Countries? A Case Study of the Philippines from a Real Options Perspective

Agaton

2022

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Geopolitical conflicts, involving a major player in the world market, affect the prices of oil and commodities, particularly in oil-importing countries. Consequently, the unprecedented changes in oil prices impact investments in energy transition projects. This study aims to analyze the dynamics of investment decisions in energy transition under uncertainties in geopolitical risks. This research applies the Black-Scholes-based real options valuation to value the flexibility in postponing energy transition investments considering the repercussions of the Russia-Ukraine war. Applying the proposed model to the case of the Philippines, the valuation result with a net present value of USD 231 million for a 1 GW capacity shows that energy transition is a viable project when the cost savings from using fossil fuels to renewables are considered. On the other hand, real options valuation finds a higher flexibility value of USD 990 million, which implies a better decision to postpone the project. The uncertainty in geopolitical conflicts further increases this value causing a longer waiting period to implement the energy transition project. Sensitivity analysis shows that the results are robust to changes in the explanatory variables. Results provide policy implications on making an oil-importing country energy self-sufficient and robust from economic and geopolitical shocks.

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