Solar PV leasing in Singapore: enhancing return on investments with options

7th International Conference on Environment and Industrial Innovation

生态环境科学;工业技术

Song, Shuang^1 ; Poh, K.L.^1

Department of Industrial and Systems Engineering, National University of Singapore, 1 Engineering Drive, Singapore

117576, Singapore^1

关键词: Changing environment;    Leasing companies;    Managerial flexibility;    Renewable energies;    Renewable energy source;    Return on investments;    Technological development;    The net present value (NPV);   

Others  :  https://iopscience.iop.org/article/10.1088/1755-1315/67/1/012020/pdf
DOI  :  10.1088/1755-1315/67/1/012020

来源: IOP

【 摘 要 】

Renewable energy is getting more important nowadays as an alternative to traditional energies. Solar energy, according to Energy Market Authority, is the most viable in the context of Singapore compared to other renewable energy sources due to land constraints. In light of the increasing adoption of solar power in Singapore, this paper focuses on solar PV leasing using a case study. This paper assesses the prospect for solar PV leasing companies in Singapore through the lens of embedded real options. The recent news that solar power is becoming the cheapest form of new electricity presents the leasing company an option to expand the scale of solar PV system. Taking into account this option, the Net Present Value (NPV) of the investment increased significantly compared to the case without real options. Technological developments result in a continuously changing environment with uncertainties. Thus, decision makers need to be aware of the inherent risk associated and identify options to maximize NPV. This upside potential is realized by exercising the managerial flexibility and exploiting the uncertainty. The paper enables solar energy planners to consider possible managerial flexibilities under uncertainties, showing how option thinking can be incorporated in the valuation of solar energy.