D’Alpaos C.; Andreolli F. (2020).

The Value of Investing in Domestic Energy Storage Systems. International Conference on Computational Science and Its Applications. ICCSA 2020: Computational Science and Its Applications – ICCSA 2020 pp 148–161.

Abstract:

In this paper, we investigate whether investments in battery storage systems, coupled with existing PV plants, are profitable in the phasing out of incentives. In detail, we analyze the investment decision of a household, who has already invested in a PV plant and has to decide whether and when to invest in the adoption of battery storage systems (BSS). We provide a Real Option Model to determine the value of the opportunity to invest and its optimal timing. The existing PV plant gives the household the opportunity to invest in BSS adoption, and this opportunity is analogous to a call option. Our findings show that negative NPV investments may turn to be profitable if the household optimally exercises the option to defer. The greater the volatility of energy prices, the greater the option value to defer, and the greater the opportunity cost of waiting (i.e., the greater the energy prices drift), the smaller the option value to defer.