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Economic Analysis of Renewable Energy Regulation in France: A Case Study for Photovoltaic Plants Based on Real Options

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  • José Balibrea-Iniesta

    (Department of Organization Engineering, Business Administration and Statistics, HTS Industrial Engineering, Polytechnic University of Madrid, C/José Gutiérrez Abascal, 2, 28006 Madrid, Spain)

Abstract

In this work, a novel methodology based on the real options theory has been developed for the evaluation of photovoltaic energy projects with a capacity greater than 100 KW in France. French legislation that regulates these types of projects presents two real options: on the one hand, the producer has a put option that consists of choosing between a Feed-in Tariff system and electricity market sale prices every year, and this put option coincides with public subsidies granted by the French Administration. On the other hand, the French Administration has a call option that provides a benefit to the public sector. This option supposes a limit on the subsidized production of electricity and reduces the value of the project to the promoter. The value of the put option is 4.28 € per MWh generated. The Extended Net Present Value has a value of −5.26 million Euros. The breakeven point of the project is achieved with an increase of 59% in the regulated rate. This means that the French Administration must increase the value of public subsidies if it wants to develop large-scale projects.

Suggested Citation

  • José Balibrea-Iniesta, 2020. "Economic Analysis of Renewable Energy Regulation in France: A Case Study for Photovoltaic Plants Based on Real Options," Energies, MDPI, vol. 13(11), pages 1-19, June.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:11:p:2760-:d:365626
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    5. Balibrea-Iniesta, José & Rodríguez-Monroy, Carlos & Núñez-Guerrero, Yilsy María, 2021. "Economic analysis of the German regulation for electrical generation projects from biogas applying the theory of real options," Energy, Elsevier, vol. 231(C).
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