Evaluating consumer investments in distributed energy technologies

Giorgio Castagneto Gissey; Behnam Zakeri; Paul E. Dodds; Dina Subkhankulova

doi:10.1016/j.enpol.2020.112008

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 journal › Journal article › Research › peer-review

15 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 language	English
Article number	112008
Journal	Energy Policy
Volume	149
ISSN	0301-4215
DOIs	https://doi.org/10.1016/j.enpol.2020.112008
Publication status	Published - 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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title = "Evaluating consumer investments in distributed energy technologies",

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.",

keywords = "Energy storage, Feasibility study, Private investment, Prosumer, Renewable energy integration, Solar PV, System value",

author = "{Castagneto Gissey}, Giorgio and Behnam Zakeri and Dodds, {Paul E.} and Dina Subkhankulova",

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. ",

year = "2021",

doi = "10.1016/j.enpol.2020.112008",

language = "English",

volume = "149",

journal = "Energy Policy",

issn = "0301-4215",

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T1 - Evaluating consumer investments in distributed energy technologies

AU - Castagneto Gissey, Giorgio

AU - Zakeri, Behnam

AU - Dodds, Paul E.

AU - Subkhankulova, Dina

N1 - 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.

PY - 2021

Y1 - 2021

N2 - 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.

AB - 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.

KW - Energy storage

KW - Feasibility study

KW - Private investment

KW - Prosumer

KW - Renewable energy integration

KW - Solar PV

KW - System value

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DO - 10.1016/j.enpol.2020.112008

M3 - Journal article

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SN - 0301-4215

VL - 149

JO - Energy Policy

JF - Energy Policy

M1 - 112008

ER -

Evaluating consumer investments in distributed energy technologies

Abstract

Bibliographical note

Keywords

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