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The valuation of photovoltaic power generation under carbon market linkage based on real options


  • Tian, Lixin
  • Pan, Jianglai
  • Du, Ruijin
  • Li, Wenchao
  • Zhen, Zaili
  • Qibing, Gao


This paper provides a real option approach to analyze investment value for photovoltaic power generation under carbon market linkage. The primary purpose is to evaluate photovoltaic power generation under uncertainties from the perspective of power generation enterprises. Uncertainties in investment costs, electricity prices, carbon prices and subsidy payments are considered. In addition, the Market Co-movements of investment costs are considered in this study. Dunhuang is taken as a case study to evaluate the value of photovoltaic power generation through scenario analysis. The result shows that the investment value of photovoltaic power generation is negative. Enterprise should give up the investment or delay investment until mature conditions. Moreover, the investment value can be improved by technical improvement, increasing a certain range of subsidy payments, etc. The research presented would be useful for photovoltaic power generation project evaluation and related decision-marking.

Suggested Citation

  • Tian, Lixin & Pan, Jianglai & Du, Ruijin & Li, Wenchao & Zhen, Zaili & Qibing, Gao, 2017. "The valuation of photovoltaic power generation under carbon market linkage based on real options," Applied Energy, Elsevier, vol. 201(C), pages 354-362.
  • Handle: RePEc:eee:appene:v:201:y:2017:i:c:p:354-362
    DOI: 10.1016/j.apenergy.2016.12.092

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    References listed on IDEAS

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    Cited by:

    1. Marek Durica & Danuse Guttenova & Ludovit Pinda & Lucia Svabova, 2018. "Sustainable Value of Investment in Real Estate: Real Options Approach," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-18, December.
    2. Maeda, Mansaku & Watts, David, 2019. "The unnoticed impact of long-term cost information on wind farms’ economic value in the USA. – A real option analysis," Applied Energy, Elsevier, vol. 241(C), pages 540-547.
    3. Barbara Glensk & Reinhard Madlener, 2019. "Energiewende @ Risk: On the Continuation of Renewable Power Generation at the End of Public Policy Support," Energies, MDPI, Open Access Journal, vol. 12(19), pages 1-25, September.
    4. Bertolini, Marina & D'Alpaos, Chiara & Moretto, Michele, 2018. "Do Smart Grids boost investments in domestic PV plants? Evidence from the Italian electricity market," Energy, Elsevier, vol. 149(C), pages 890-902.
    5. Fan, Xinghua & Lv, Xiangxiang & Yin, Jiuli & Tian, Lixin & Liang, Jiaochen, 2019. "Multifractality and market efficiency of carbon emission trading market: Analysis using the multifractal detrended fluctuation technique," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    6. Li, Shoujun & Ma, Xiaoping & Yang, Chunyu, 2018. "A combined thermal power plant investment decision-making model based on intelligent fuzzy grey model and ito stochastic process and its application," Energy, Elsevier, vol. 159(C), pages 1102-1117.
    7. Fang, Guochang & Tian, Lixin & Liu, Menghe & Fu, Min & Sun, Mei, 2018. "How to optimize the development of carbon trading in China—Enlightenment from evolution rules of the EU carbon price," Applied Energy, Elsevier, vol. 211(C), pages 1039-1049.


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