Flexible and integrated. Photovoltaic Investment evaluation in a Smart Grid environment

In Italy and in the countries working for GHG emissions reduction - the last decade was characterized by a large development of distributed generation power plant. Private investment in the sector have been heavily boosted with monetary incentives, like guaranteed feed-in tari¤s, especially for the photovoltaic sector. These incentives, on one hand, allowed for developing photovoltaic technology faster, guaranteeing payo¤s for huge initial investments, but on the other hand they cause an increase in public costs, that regard both monetary disbursement to pay incentives and system costs connected to the management of a number of energy sources not e¢ ciently integrated. To allow the development of photo-voltaic energy production in a sustainable way, it's necessary to nd out how to design economic payo¤ for private investors and to ask them to collaborate for system balancing and management: this objective shall be reached implementing a Smart Grid. The paper provides a model to evaluate a private investment in photovoltaic power plant, assuming it is integrated in a "smart" grid, that allows for price information delivery and private behavior reaction. To capture investment management fexibility, a real option approach is implemented.