Optimal timing and capacity choice under the rate-of-return renewable energy support
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https://hdl.handle.net/11250/2726569Utgivelsesdato
2020Metadata
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This article presents a stylized renewable energy (RE) investment project profitability analysis under a rate-of-return RE support type. We use a dynamic programming approach to value the real options. While the method is widely used in RE policy analysis, the rate-of-return support is presented in this framework for the first time. We formulate a stylized RE project under the rate-of-return regulation in the dynamic programming framework and solve for optimal investment timing and project size.•
A stylized renewable energy (RE) investment under rate-of-return RE support is presented in the dynamic programming framework;
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The system is solved for optimal capacity choice in the presence of the electricity price uncertainty. We also comment on the optimal investment timing, which turns out to be a now-or-never decision in this case.