Optimal feed-in tariff for solar photovoltaic power generation in China: A real options analysis

Zhang, M.M.; Zhou, Dequn; Zhou, P.; Liu, G.Q.

doi:10.1016/j.enpol.2016.07.028

Cited by 104 publications

(38 citation statements)

References 36 publications

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“…Countries around the world have developed many technologies and proposed various policies to promote the development of renewable energy such as large-scale energy storage [1], feed-in tariffs (FIT) and renewable portfolio standards (RPS). Large-scale energy storage is a practical solution in adopting renewable energy resources in power grid as an important technology [2], and many countries have considered it as a viable solution to increase the contribution of renewable energy resources [3,4].…”

Section: Introductionmentioning

confidence: 99%

The Development of the Renewable Energy Power Industry under Feed-In Tariff and Renewable Portfolio Standard: A Case Study of China’s Photovoltaic Power Industry

et al. 2017

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Among the regulatory policies, feed-in tariffs (FIT) and renewable portfolio standards (RPS) are the most popular to promote the development of renewable energy power industry. They can significantly contribute to the expansion of domestic industrial activities in terms of sustainable energy. In this paper, we synthetically consider various important factors with the analysis of the existing literature, and use system dynamics (SD) to establish models of long-term development of the renewable energy power industry under FIT and RPS schemes. The model not only clearly shows the complex logical relationship between the factors but also reveals the process of coordination between the two policy tools in the development of the renewable energy power industry. In addition, as an example of development of renewable energy industry, the paper studies the development of China's photovoltaic power industry under different scenarios. The models proposed in this paper can provide a reference for scholars to study development of the renewable energy power industry in different countries, thereby facilitating an understanding of the renewable energy power's long-term sustainable development pattern under FIT and RPS schemes, and helping to provide references for policy-making institutions. The results show that in the perfect competitive market, the implementation of RPS can promote long-term and rapid development of China's photovoltaic power industry given the constraints and actions of the mechanisms of RPS quota proportion, the TTGC valid period, and fines, compared with FIT. At the end of the paper, policy implications are offered as references for the government.Sustainability 2017, 9, 532 2 of 23 activities in terms of sustainable energy [5]. Among the regulatory policies, FIT and RPS are the most popular. More than 60 countries and regions worldwide have implemented one or other of the two policies [6]. FIT and RPS have common attributes, in that both are policy tools with dual characteristics of government intervention and market regulation.FIT policy, represented by China, South America, and most European countries, is a scheme designed to accelerate investment in renewable energy technologies. It is a government-led regulatory mechanism that requires power grid enterprises to buy electricity from renewable energy producers at government-specified prices. In the early stages of renewable energy development, it ensured the sale of renewable energy at a protected price, ensuring that the high costs of electricity generation associated with certain renewable energy technologies do not prohibit the development and use of those technologies, eliminating the usual uncertainties and risks of renewable energy [7]. The goal of the FIT is to offer cost-based compensation to renewable energy producers, providing them with price certainty and long-term contracts that help finance renewable energy investments [8].

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Section: Introductionmentioning

confidence: 99%

The Development of the Renewable Energy Power Industry under Feed-In Tariff and Renewable Portfolio Standard: A Case Study of China’s Photovoltaic Power Industry

et al. 2017

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“…The risk premium was derived by the Monte Carlo simulation. Zhang et al [52] applied ROA for investments in solar PV, trying to find the optimal feed-in tariff level for this technology in different regions of China (they used a backward dynamic programming algorithm in combination with the least-squares Monte Carlo simulation). Alharbi and Csala [53] used the Monte Carlo simulation and stochastic processes (Brownian motions) to predict the future behavior of solar and wind energy, along with long-term temperature performance based on 69 years of historical daily data.…”

Section: Operational Flexibility and Monte Carlo Simulation In Energymentioning

confidence: 99%

The Valuation of the Operational Flexibility of the Energy Investment Project Based on a Gas-Fired Power Plant

2020

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This paper presents an attempt to the valuation of the operational flexibility of the energy investment project based on the example of combined cycle gas turbine (CCGT). For this purpose, the real options approach (ROA), net present value (NPV) method, and the Monte Carlo (MC) simulation have been used. Motivations to take up such a topic result from the fact that traditional valuation methods neglect flexibility embedded in CCGT assets. Operational flexibility was defined as the switching option to dynamically shut down and restart gas units. Valuation of the operational flexibility, the project’s extended net present value (XNPV), was based on a discounted cash flow model. The Monte Carlo simulation, allowing for better replication of the stochastic nature of market factors and some technical parameters, was introduced to the valuation model. The obtained results indicate that the value of the options significantly influences the NPV of the analyzed technology and its risk profile. The NPV was calculated at −169.1 million USD, while the XNPV amounted to 102.5 million USD. This difference, compared to the NPV distribution range at a significance level of 0.05, was more than 8.1% (almost 10.4% for α = 0.1). The results achieved help to explain the significance of the operational flexibility in the modeling profitability of CCGT technologies.

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“…In additional, the amount of carbon emission by unit coal-fired power and unit carbon emission price were both taken from Ref. [55]. The amount of coal consumption by unit coal-fired power was taken from Ref.…”

Section: Data and Assumptionsmentioning

confidence: 99%

The Determination of Concession Period for Build-Operate-Transfer Solar Photovoltaic Power Project under Policy Incentives: A Case Study of China

Chen

2019

Energies

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Since the concession period is one of the most crucial variables influencing the success of a photovoltaic (PV) power project under build-operate-transfer (BOT) mode, this paper presents a real option game model—which integrates the real option and cooperative game theory—to determine the optimal concession period of the BOT solar PV power project under policy incentives by considering the value of the option to defer. In the proposed model, an effective interval of concession period for the BOT project was identified by using a real option, and the equilibrium value of the concession period was obtained by applying classical optimization theory. To evaluate our model, we empirically determined the optimal concession period for the BOT solar PV power project in China, and a sensitivity analysis was conducted to demonstrate how relevant influential factors, which are presented in the model, affect the equilibrium value of the concession period and its effective interval. The results indicate that the current investment environment in China could successfully implement the BOT solar PV power project under policy incentives, including initial cost subsidy and the feed-in tariffs mechanism. While the high volatility of electricity demand, investment cost, and land-use rent fee can lead the failure of the BOT solar PV project implementation, promoting the technological development of PV power generation, maintaining the market stability, and increasing the policy incentives can help the BOT power project to be arranged with an optimal concession period. In addition, the feed-in tariffs mechanism is more helpful than the initial cost subsidy for winning the BOT contract.

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Optimal feed-in tariff for solar photovoltaic power generation in China: A real options analysis

Cited by 104 publications

References 36 publications

The Development of the Renewable Energy Power Industry under Feed-In Tariff and Renewable Portfolio Standard: A Case Study of China’s Photovoltaic Power Industry

The Development of the Renewable Energy Power Industry under Feed-In Tariff and Renewable Portfolio Standard: A Case Study of China’s Photovoltaic Power Industry

The Valuation of the Operational Flexibility of the Energy Investment Project Based on a Gas-Fired Power Plant

The Determination of Concession Period for Build-Operate-Transfer Solar Photovoltaic Power Project under Policy Incentives: A Case Study of China

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