With increasing penetration of distributed energy resources (DERs), the application of DERs projects is of interest. Since it has significant property of flexibility (for example, the option to defer investment), the traditional decision making method—‘now or never’ is not applicable. In this paper, we propose the utilization of Real Options (RO) method in making decision on the entry time for residential DERs, which considers the decrease in initial costs and can recommend the best investment timing for home owners, in order to maximize the profits, thus flexibility value is addressed in making investments. Monte-Carlo simulation is applied to generate random passes for electricity price. The investment on roof-top solar energy for a community is used as the study case, to verify our theory and corresponding methods.
['Xian Guo', 'Jo Min', 'He Guo']
Investment timing study for residential distributed energy resource projects: A Real-Option approach