Least Squares Monte Carlo Simulation-Based Decision-Making Method for Photovoltaic Investment in Korea

Jungmin An,Sung-Kwan Joo,Dong-Kwan Kim,Jinyeong Lee

doi:10.3390/su131910613

Jungmin An, Sung-Kwan Joo + Show 2 more

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https://doi.org/10.3390/su131910613

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Abstract

Solar power for clean energy is an important asset that will drive the future of sustainable energy generation. As interest in sustainable energy increases with Korea’s renewable energy expansion plan, a strategy for photovoltaic investment (PV) is important from an investor’s point of view. Previous research primarily focused on assessing and analyzing the impact of the volatility but paid little attention to the modeling decision-making project to obtain the optimal investment timing. This paper utilizes a Least Squares Monte Carlo-based method for determining the timing of PV plant investment. The proposed PV decision-making method is designed to simulate the total PV generation revenue period with all uncertain PV price factors handled before determining the optimal investment time. The numerical studies with nine different scenarios considering system marginal price (SMP) and renewable energy certificate (REC) spot market price in Korea demonstrated how to determine the optimal investment time for different PV capacities. Therefore, the proposed method can be used as a decision-making tool to provide PV investors with information on the best time to invest in the renewable energy market.

Highlights

Over the past decades, energy transition has been growing following the diffusion of renewable energy resources worldwide [1]
Portfolio Standard (RPS), obligating electricity suppliers to source a specified proportion of the electricity they provide to customers from entitled renewable sources [2]
The data for the photovoltaic investment (PV) investment plan algorithm, which inwhere ij is the net profit in year i in month j, CSij is the generated PV power in year i in cludes financial variables and maintenance durations, month j, ICsol,ij is the installed capacity of PV, SMPij is are the fixed price in year i in month j, study generators located

Summary

Introduction

Energy transition has been growing following the diffusion of renewable energy resources worldwide [1]. Korea started actively participating in climate-related activities aiming for a higher penetration level of renewable sources. Such activities include operating a renewable energy supply policy referred to as the Renewable. Portfolio Standard (RPS), obligating electricity suppliers to source a specified proportion of the electricity they provide to customers from entitled renewable sources [2]. This can be conducted and fulfilled using a renewable energy certificate (REC). The REC is issued to energy generators according to the amount of eligible renewable electricity they generate. The REC is weighted based on the source they use to generate electricity [3]

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Conclusion