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Photovoltaic Smart Grids in the Prosumers Investment Decisions: a Real Option Model

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  • Castellini, Marta
  • Menoncin, Francesco
  • Moretto, Michele
  • Vergalli, Sergio

Abstract

The digitization of power system represents one of the main instruments to achieve the target set by the European Union 2030 climate and energy Agenda of affordable energy transition. During the last years, such innovation process has been associated with the Smart Grid (SG) term. In this context, efficiency and flexibility of power systems are expected to increase and energy consumers to be active also on the production side, thus becoming prosumers (agents that both produce and consume energy). This paper provides a theoretical real option framework with the aim to model prosumers’ decision to invest in photovoltaic power plants, assuming that they are integrated in a Smart Grid. Our main focus is to study the optimal plant size and the optimal investment threshold, in a context where exchange of energy among prosumers is possible. The model was calibrated and tested with data from the Northern Italy energy market. Our findings show that the possibility of selling energy between prosumers, via the Smart Grid, increases investment values. This opportunity encourages prosumers to invest in a larger plant compared with the case without exchange possibility and that there is a positive relation between optimal size and (optimal) investment timing. The effect of uncertainty is in line with the literature, showing increasing value to defer with volatility.

Suggested Citation

  • Castellini, Marta & Menoncin, Francesco & Moretto, Michele & Vergalli, Sergio, "undated". "Photovoltaic Smart Grids in the Prosumers Investment Decisions: a Real Option Model," ES: Economics for Sustainability 301034, Fondazione Eni Enrico Mattei (FEEM) > ES: Economics for Sustainability.
    • Handle: RePEc:ags:feemec:301034
    DOI: 10.22004/ag.econ.301034
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    Cited by:

    1. Andreolli, Francesca & D’Alpaos, Chiara & Kort, Peter, 2025. "Does P2P trading favor investments in PV–Battery Systems?," Energy Economics, Elsevier, vol. 145(C).
    2. Andreolli, Francesca & D’Alpaos, Chiara & Moretto, Michele, 2022. "Valuing investments in domestic PV-Battery Systems under uncertainty," Energy Economics, Elsevier, vol. 106(C).
    3. D'Adamo, Idiano & Gastaldi, Massimo & Morone, Piergiuseppe & Ozturk, Ilhan, 2022. "Economics and policy implications of residential photovoltaic systems in Italy's developed market," Utilities Policy, Elsevier, vol. 79(C).
    4. Raisa Pérez-Vas & Félix Puime Guillén & Joaquín Enríquez-Díaz, 2021. "Valuation of a Company Producing and Trading Seaweed for Human Consumption: Classical Methods vs. Real Options," IJERPH, MDPI, vol. 18(10), pages 1-13, May.
    5. Sam Wilkinson & Michele John & Gregory M. Morrison, 2021. "Rooftop PV and the Renewable Energy Transition; a Review of Driving Forces and Analytical Frameworks," Sustainability, MDPI, vol. 13(10), pages 1-25, May.
    6. Dirk Bergemann & Marina Bertolini & Marta Castellini & Michele Moretto & Sergio Vergalli, 2025. "Optimal Management of Public Energy Communities: Investment Strategies and Welfare Maximization," Cowles Foundation Discussion Papers 2452, Cowles Foundation for Research in Economics, Yale University.
    7. Castellini, Marta & Di Corato, Luca & Moretto, Michele & Vergalli, Sergio, 2021. "Energy exchange among heterogeneous prosumers under price uncertainty," Energy Economics, Elsevier, vol. 104(C).
    8. Anna Carozzani & Chiara D’Alpaos, 2025. "The Real Option Approach to Investment Decisions in Hybrid Renewable Energy Systems: A Systematic Literature Review," Energies, MDPI, vol. 18(20), pages 1-35, October.
    9. Berg, Tobias & Carletti, Elena & Claessens, Stijn & Krahnen, Jan Pieter & Monasterolo, Irene & Pagano, Marco, 2023. "Climate regulation and financial risk: The challenge of policy uncertainty," SAFE Policy Letters 100, Leibniz Institute for Financial Research SAFE.
    10. Buchetti, Bruno & Miquel-Flores, Ixart & Perdichizzi, Salvatore & Reghezza, Alessio & Lin, Luca X., 2024. "Loan guarantee and portfolio greening: evidence from European credit registers," Working Paper Series 2916, European Central Bank.
    11. Zhang, Hanyu & Assereto, Martina & Byrne, Julie, 2023. "Deferring real options with solar renewable energy certificates," Global Finance Journal, Elsevier, vol. 55(C).
    12. Maurizio Cellura & Alberto Fichera & Francesco Guarino & Rosaria Volpe, 2025. "Leveraging Positive Energy Districts Surplus for the Achievement of the Sustainable Development Goals," Energies, MDPI, vol. 18(3), pages 1-20, January.

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • 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

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