Abstract
This paper presents a policy benefit model of a photovoltaic (PV) power generation project based on real options analysis (ROA) and the two-factor learning curve model. The main purpose is to examine the investment behavior of developing a PV project in the Gobi desert considering multiple uncertain factors. We take the environmental cost of desertification control into account for the first time in the literature. Four other uncertain factors are thermal power cost, PV power generation cost, carbon prices, and government subsidy. A binary tree method is applied to solve the proposed model, and we obtain both unit decision value and optimal investment time. Our baseline scenario illustrates that ROA is more effective than net present value (NPV) analysis when dealing with uncertainty. Our simulation results show that the government could suffer a loss in accordance with the existing subsidy policy when investing in a PV project. Therefore, the subsidy should be gradually reduced. Finally, the influence of the subsidy policy on decision value is discussed, and an appropriate subsidy is determined accordingly.
Highlights
Due to the shortage of energy, global warming, and environmental deterioration, the world has focused attention on sources of renewable energy (RE), among which solar energy is widely favored for its unique advantages
This paper presents a policy benefit model based on real options analysis (ROA) and the two-factor learning curve model
Our study shows that thermal power cost, PV power generation cost, carbon prices, environmental cost of desertification control, and government subsidy may affect the decision value of the PV project
Summary
Due to the shortage of energy, global warming, and environmental deterioration, the world has focused attention on sources of renewable energy (RE), among which solar energy is widely favored for its unique advantages. It can solve the local labor problem by providing employment opportunities for people whose living conditions are not suitable for farming, animal husbandry, or forestry As a result, this project would reduce local farming, animal husbandry, and forestry scale and reduce agricultural demand for water resources, which means that it would improve the ecological environment. With the background of the Gobi desert, this study establishes a policy benefit model of PV power generation projects based on real options analysis (ROA) and the two-factor learning curve model.
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