Land-use Change and Solar Energy Production: A Real Option Approach
AbstractIn this paper a real option model is developed to examine the critical factors affecting the decision to lease agricultural land to a company installing a PV power plant. The leasing payment is certain while the net revenues from agriculture are uncertain. We identify the profit values at which the farmer decides to lease his plot vs. continue farming it. By applying the model to the province of Bologna (Italy), we illustrate the possible land-use change scenarios in this area. We conclude by discussing the importance of PV energy production as a source of income for farmers and its implications from a social perspective.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.90.
Date of creation: Dec 2011
Date of revision:
Land Allocation; Real Options; Renewable Energy; Solar farm; Uncertainty;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-02-01 (Agricultural Economics)
- NEP-ALL-2012-02-01 (All new papers)
- NEP-ENE-2012-02-01 (Energy Economics)
- NEP-ENV-2012-02-01 (Environmental Economics)
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