The role of the discount rates in energy systems optimisation models

García-Gusano, Diego; Espegren, Kari Aamodt; Lind, Arne; Kirkengen, Martin

doi:10.1016/j.rser.2015.12.359

Cited by 94 publications

(48 citation statements)

References 30 publications

(51 reference statements)

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“…This result conforms with previous studies affirming that RES with higher proportion of capital investments are more expensive with high discount rate, while electricity generated from coal (and other fossil fuels) with significant proportion of operational and variable costs are far less susceptible to changes in discount rates due to lower capital costs (Copiello et al 2017;Jeon et al 2015;Pereira et al 2013). Hence, lower social discount rates entail greater contributions of renewable technologies while higher social discount rates favor the use of fossil fuels (Gusano et al 2016). Table 3 shows the trigger prices at different volatilities in coal prices.…”

Section: Sensitivity In Discount Rate and Volatility Of Coal Pricesupporting

confidence: 91%

Use coal or invest in renewables: a real options analysis of energy investments in the Philippines

Agaton

2018

Renewables

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This paper aims to analyze the comparative attractiveness of either investing in various renewable energy sources or continue using coal for electricity generation in the Philippines. Using real options approach, this research evaluates the investment value and trigger prices of coal for switching technologies with some scenarios in coal price uncertainty and social discount rate. The results find that investing in renewable energy is a better option than continue using coal for electricity generation. Among renewable energy sources, geothermal is the most attractive to invest to, followed by wind, hydroelectric, and solar photovoltaic.

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Section: Sensitivity In Discount Rate and Volatility Of Coal Pricesupporting

confidence: 91%

Use coal or invest in renewables: a real options analysis of energy investments in the Philippines

Agaton

2018

Renewables

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“…Blanco-Diez et al (2020) [5] have recently analyzed how changes in Spanish legislation have impacted remuneration, but only in terms of revenue and without considering profitability, and hence, cost of capital. Pavel Atănăsoae (2020) [13] uses a discount rate of 5% for his financial assessment but does not justify it, similarly to García-Gusano et al (2016) [14], who do not justify the discount rates employed for the financial methodology used in their study either.…”

Section: Discount Rate Methodologymentioning

confidence: 98%

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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“…Discounting in energy system analysis considers two perspectives: social dr, for evaluating costs and benefits from a societal perspective, and individual dr, for evaluating investment decisions [51]. Applied social dr in energy studies ranges between 1% and 7% and the dr for industrial investors ranges from 6% to 15% [51,52]. In the sensitivity analysis of this study the considered values for dr are 3%, 9%, and 15%.…”

Section: Discount Rate Drmentioning

confidence: 99%

Towards Optimal Sustainable Energy Systems in Nordic Municipalities

2020

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Municipal energy systems in the northern regions of Finland, Norway, and Sweden face multiple challenges: large-scale industries, cold climate, and a high share of electric heating characterize energy consumption and cause significant peak electricity demand. Local authorities are committed in contributing to national goals on CO2 emission reductions by improving energy efficiency and investing in local renewable electricity generation, while considering their own objectives for economic development, increased energy self-sufficiency, and affordable energy costs. This paper formulates a multi-objective optimization problem about these goals that is solved by interfacing the energy systems simulation tool EnergyPLAN with a multi-objective evolutionary algorithm implemented in Matlab. A sensitivity analysis on some key economic parameters is also performed. In this way, optimal alternatives are identified for the integrated electricity and heating sectors and valuable insights are offered to decision-makers in local authorities. Piteå (Norrbotten, Sweden) is used as a case study that is representative of Nordic municipalities, and results show that CO2 emissions can be reduced by 60% without a considerable increase in total costs and that peak electricity import can be reduced by a maximum of 38%.

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The role of the discount rates in energy systems optimisation models

Cited by 94 publications

References 30 publications

Use coal or invest in renewables: a real options analysis of energy investments in the Philippines

Use coal or invest in renewables: a real options analysis of energy investments in the Philippines

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

Towards Optimal Sustainable Energy Systems in Nordic Municipalities

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