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

Author

Listed:
  • Jungmin An

    (School of Electrical Engineering, Anam Campus, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

  • Dong-Kwan Kim

    (School of Electrical Engineering, Anam Campus, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

  • Jinyeong Lee

    (Korea Electrotechnology Research Institute, 138, Naesonsunhwan-ro, Uiwang-si 16029, Korea)

  • Sung-Kwan Joo

    (School of Electrical Engineering, Anam Campus, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

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.

Suggested Citation

  • Jungmin An & Dong-Kwan Kim & Jinyeong Lee & Sung-Kwan Joo, 2021. "Least Squares Monte Carlo Simulation-Based Decision-Making Method for Photovoltaic Investment in Korea," Sustainability, MDPI, vol. 13(19), pages 1-14, September.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:19:p:10613-:d:642390
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    1. Andrea Senova & Alica Tobisova & Robert Rozenberg, 2023. "New Approaches to Project Risk Assessment Utilizing the Monte Carlo Method," Sustainability, MDPI, vol. 15(2), pages 1-19, January.
    2. Mombello, Bruno & Olsina, Fernando & Pringles, Rolando, 2023. "Valuing photovoltaic power plants by compound real options," Renewable Energy, Elsevier, vol. 216(C).
    3. Àlex Alonso-Travesset & Diederik Coppitters & Helena Martín & Jordi de la Hoz, 2023. "Economic and Regulatory Uncertainty in Renewable Energy System Design: A Review," Energies, MDPI, vol. 16(2), pages 1-30, January.

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