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Evaluating decentralized energy investments: Spatial value of on-site PV electricity

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  • Vimpari, Jussi
  • Junnila, Seppo

Abstract

Today solar power is still dominantly presented to be expensive source of electricity. However, the profitability of solar and other electricity generation technologies is typically evaluated with the Levelized Cost of Electricity (LCOE) approach. This paper questions the traditional investment evaluation logics of power production (LCOE) in the interesting case of rooftop PVs and based on customer value generation logics presents a new approach for evaluating the profitability of rooftop PV investments. The approach recognizes the value that PVs produce to real estate owners and utilize basic real estate investment models to evaluate the profitability of PVs. The results imply that, if PVs are considered as a part of the underlying property, rooftop PV systems are already today profitable in many European cities and can provide substantial returns on investment for property owners. More interestingly, the results imply that rooftop PV investments are most profitable in the dense urban cores instead of more remote (industrial) locations, and thus the current trend of urbanization seems to further strengthen the profitability of rooftop solar power. This paper points out that spatial locations drive the economic analysis of real estate, and thus it is likely that it will drive the economic analysis of decentralized on-site energy investments as well.

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  • Vimpari, Jussi & Junnila, Seppo, 2017. "Evaluating decentralized energy investments: Spatial value of on-site PV electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 1217-1222.
    • Handle: RePEc:eee:rensus:v:70:y:2017:i:c:p:1217-1222
    DOI: 10.1016/j.rser.2016.12.023
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    Cited by:

    1. Vimpari, Jussi & Junnila, Seppo, 2019. "Estimating the diffusion of rooftop PVs: A real estate economics perspective," Energy, Elsevier, vol. 172(C), pages 1087-1097.
    2. Eerika Janhunen & Niina Leskinen & Seppo Junnila, 2020. "The Economic Viability of a Progressive Smart Building System with Power Storage," Sustainability, MDPI, vol. 12(15), pages 1-18, July.

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