Using DNPV for valuing investments in the energy sector: A solar project case study

Espinoza, R. David; Rojo, Javier

doi:10.1016/j.renene.2014.09.011

Cited by 27 publications

(17 citation statements)

References 5 publications

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“…This research explores the potential value of cities from the viewpoint of public art exhibitions. Espinoza and Rojo [7] used net present value (NPV) to estimate investments in the energy sector. Drawing on their study, this research uses NPV along with the internal rate of return (IRR) to evaluate the profits from and investments in exhibitions.…”

Section: Literature Reviewmentioning

confidence: 99%

Investment Decision Analysis for Public Art Exhibitions

Tsung¹,

Chen²

2016

ujm

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In recent years, China's growing cultural industry has significantly enhanced the region's cultural level and recognized public art and continues to develop the creative industry in various Chinese cities (except Beijing, Shanghai, and Canton). Through large-scale international public art exhibitions, each city in China intends to increase its cultural competitiveness, establish an image, and develop its cultural tourism industry and cross-border cultural exchange. By doing so, they hope to produce a combined movement toward creating a sustainable cultural art industry. This study examines the strategies undertaken to conduct the exhibition for the public art installation, the Rubber Duck, by Florentijn Hofman. In particular, it focuses on Hofman's Chinese agencies and the exhibition organizers in the city of Hangzhou and investigates whether random public art indicators influence the estimated effects prior to the exhibition and if there are actual benefits after the exhibition. This study evaluates profits and investments using net present value, internal rate of return, and game options. An analysis of existing mathematical models reveals that such models can provide analytical results across varying time periods. The results of the present model can help decide whether one should invest or turn down an exhibition in a given city.

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Section: Literature Reviewmentioning

confidence: 99%

Investment Decision Analysis for Public Art Exhibitions

Tsung¹,

Chen²

2016

ujm

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“…The main investment evaluation index based on the financial flow, is the Net Present Value (NPV), even decoupled (Espinoza and Rojo, 2015) for renewable energy feasability studies and even in uncertainity situations (Hallmann and Amacher, 2014); NPV expresses the value of the investment as the sum of the discounted cash flows. It quantifies the wealth in monetary units created or destroyed via the investment.…”

Section: Net Present Value (Npv) Approachmentioning

confidence: 99%

Evaluation of Biogas Plants by the Application of an Internal Rate of Return and Debt Service Coverage Approach

Bonazzi¹,

Iotti²

2015

American Journal of Environmental Sciences

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Energy production using renewable energy has an effect on environmental sustainability and on public expenditure. In fact, this industry is heavily assisted by public support from the European Union and the Italian State. Developing and applying a method to evaluate the return on investment for companies operating in the field of renewable energy allows them to quantify their efficient use of public resources. In this research we develop an assessment method that combines the rate of return on equity capital (IRRE) and financial viability (DSCR), in which IRRE > Ke and sub DSCR >1 for any given period of the investment. This method enables us to quantify both the equity capital return and financial sustainability. The method is applied to a case study of a company's production of biogas from livestock effluents located in the province of Reggio Emilia, Italy. The analysis shows that biogas investment guarantees financial sustainability, even in the case of financial liabilities, in the case examined. It also shows that IRRE is higher than average, with a return on equity assured both by market average (MRP) and government bonds in the long term. The research could be further developed by quantifying the social welfare generated by public spending and private investment as equity capital, both in terms of its activation of the economy and in terms of assessing the environmental effects that qualify as externalities.

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“…To date, academic works analyzing the profitability of PV installations have mainly used subjective discount rates for this purpose and have not taken into account the financial reality of the companies nor market uncertainties. For instance, Sorgato et al (2018) employed a discount rate of 5.5%, whereas the Brazilian National Bank for Economic and Social Development [3] and Espinosa and Rojo (2015) [4] set it at 10%. In this study, we aim to find a more financially rigorous way of calculating the discount rates for PV investments, bearing in mind the company's size and its market.…”

Section: Introductionmentioning

confidence: 99%

Analyzing Profitability and Discount Rates for Solar PV Plants. A Spanish Case

Guaita-Pradas

Blasco-Ruiz

2020

Sustainability

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The widespread use of renewable energy sources and the growing concern about climate change, together with Spain’s exceptional weather and solar radiation conditions, have led to an increase in the use of photovoltaics for energy production in the country. Solar power generation has been tightly regulated, although the legal framework has changed frequently over the years. When assessing the potential financial performance of any business venture, legal as well as financial aspects must be considered, but a critical factor is the discount rate used, which must reflect the company’s capital cost. Other factors are the period of interest, the firm’s activity, market risk, and the level of debt of firms in the sector. The main objective of this study is thus to estimate the discount rate for companies using photovoltaics to produce solar power. We calculate it by employing two financial techniques: capital asset pricing model and historical return analysis. We then evaluate the investment in a photovoltaic plant with a capacity of 5000 kW located in eastern Spain, assuming it started its activity in different years which coincide with changes in the regulatory framework. The results show the relevance of the initial outlay costs for the profitability of photovoltaic power plants.

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Using DNPV for valuing investments in the energy sector: A solar project case study

Cited by 27 publications

References 5 publications

Investment Decision Analysis for Public Art Exhibitions

Investment Decision Analysis for Public Art Exhibitions

Evaluation of Biogas Plants by the Application of an Internal Rate of Return and Debt Service Coverage Approach

Analyzing Profitability and Discount Rates for Solar PV Plants. A Spanish Case

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