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Dynamic (Mis)allocation of Investments in Solar Energy

Author

Listed:
  • Nicolas Astier

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ENPC - École des Ponts ParisTech)

  • Nicolas Hatem

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ENGIE)

Abstract

Because they differ in terms of technology, size and location, solar photovoltaic installations exhibit very heterogeneous levelized costs of producing electricity. Therefore, the present value cost of meeting a given trajectory of annual solar energy production depends on which projects are commissioned when: the observed sequence of investment decisions need not be cost-efficient. We propose a methodology to assess dynamic misallocation by comparing the present value cost of realized investments to a counterfactual optimal sequence of investments. Applying our methodology to France between 2005 and 2021, we find that the observed trajectory of annual solar production could have been obtained at a present value cost almost 30% lower than its realized value. Our optimized counterfactual suggests that investments in residential solar should have on average been postponed by 7 years, while investments in medium and large-scale installations should have occurred 2 to 4 years earlier.

Suggested Citation

  • Nicolas Astier & Nicolas Hatem, 2023. "Dynamic (Mis)allocation of Investments in Solar Energy," Working Papers hal-04320497, HAL.
    • Handle: RePEc:hal:wpaper:hal-04320497
    Note: View the original document on HAL open archive server: https://pse.hal.science/hal-04320497v1
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