Investment Valuation Model for Renewable Energy Systems in Buildings
AbstractTransformative technologies for producing renewable energy have promising features for substantial reductions in carbon emissions and environmental footprints of the building sector. Investments in renewable energy systems require substantial implementation costs followed by a long period of recovering the invested capital through savings in utilities bills. Favorable timing of renewable energy system implementation can reduce capital expenses and enhance returns on investments. An appropriate investment valuation method is needed to identify the appropriate time to implement any given renewable energy system and to find the values of properly scheduled investments. Real options analysis provides the ability to cope with investment timing under uncertainty. However, current real options models are theoretically limited in the context of decision making about investments in building energy improvements. In this paper, the writers address the theoretical limitations of current real options models an.