Evaluating consumer investments in distributed energy technologies

Giorgio Castagneto Gissey*, Behnam Zakeri, Paul E. Dodds, Dina Subkhankulova

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

6 Citations (Scopus)

Abstract

The adoption of solar photovoltaic and electrical energy storage by end users depends on their economic attractiveness, which is typically assessed with metrics of future cash flow such as Net Present Value (NPV). Yet analyses using NPV typically do not account for the evolution towards low-carbon electricity systems in the short and long term. We show this to be of critical importance for accurately calculating the profitability of these technologies. By linking an energy system model with a power system model, we observe substantial differences between NPV estimates calculated with and without representing potential evolutions of the electricity system. Our results suggest that not accounting for short- and long-run changes in the electricity system could underestimate the NPV of an investment in photovoltaic and storage by around 20%, especially in scenarios with high levels of renewables, moderate flexibility, and high electrification in the energy system. Using system-dependent cash flow metrics can have a major impact on end-users' energy technology profitability.

Original languageEnglish
Article number112008
JournalEnergy Policy
Volume149
ISSN0301-4215
DOIs
Publication statusPublished - 2021

Bibliographical note

Funding Information:
This research was funded by the UK Engineering and Physical Research Council (EPSRC) through the Realising Energy Storage Technologies in Low-carbon Energy Systems (RESTLESS) project ( EP/N001893/1 ) and the Complex Built Environment Systems (CBES) Platform Grant ( EP/P022405/1 ), and by the Innovation Fund Denmark through the RE-INVEST Project, and International Institute for Applied Systems Analysis (IIASA), Austria . The authors would also like to thank Professor Richard Green (Imperial College London) for useful comments and suggestions. We are very grateful to the three anonymous reviewers for useful suggestions that improved the quality of the paper.

Keywords

  • Energy storage
  • Feasibility study
  • Private investment
  • Prosumer
  • Renewable energy integration
  • Solar PV
  • System value

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