Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/149533 
Year of Publication: 
2016
Series/Report no.: 
Nota di Lavoro No. 60.2016
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
In Italy and in many EU countries, the last decade was characterized by a large development of distributed generation power plants. Their presence determined new critical issues for the design and management of the overall energy system and the electric grid due to the presence of discontinuous production sources. It is commonly agreed that contingent problems that affect local grids (e.g. inefficiency, congestion rents, power outages, etc.) may be solved by the implementation of a “smarter” electric grid. The main feature of smarts grid is the great increase in production and consumption flexibility. Smart grids give producers and consumers, the opportunity to be active in the market and strategically decide their optimal production/consumption scheme. The paper provides a theoretical framework to model the prosumer’s decision to invest in a photovoltaic power plant, assuming it is integrated in a smart grid. To capture the value of managerial flexibility, a real option approach is implemented. We calibrate and test the model by using data from the Italian energy market.
Subjects: 
Smart Grids
Renewable Energy Sources
Real Options
Prosumer
JEL: 
Q42
C61
D81
Document Type: 
Working Paper

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