The Accounting-And-Finance of a Solar Photovoltaic Plant: Economic Efficiency of a Replacement Project

4th International Conference on Energy and Environment: bringing together Engineering and Economics, Guimarães, Portugal, 16-17 May 2019

7 Pages Posted: 3 Apr 2019 Last revised: 22 Jul 2019

See all articles by Carlo Alberto Magni

Carlo Alberto Magni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering)

Andrea Marchioni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Economia Marco Biagi di Modena

Date Written: March 12, 2019

Abstract

In this work we illustrate a simple logical framework serving the purpose of assessing the economic profitability and measuring value creation in a solar photovoltaic (PhV) project and, in general, in a replacement project where the cash-flow stream is nonnegative, with some strictly positive cash flows. We use the projected accounting data to compute the average ROI, building upon Magni (2011, 2019) (see also Magni and Marchioni 2018), which enables retrieving information on the role of the project’s economic efficiency and the role of the project scale on increasing shareholders’ wealth. The average ROI is a genuinely internal measure and does not suffer from the pitfalls of the internal rate of return (IRR), which may be particularly critical in replacement projects such as the purchase of a PhV plant aimed at replacing conventional retail supplies of electricity.

Keywords: Energy project analysis, investment evaluation, value creation

JEL Classification: Q42, G11, G31, M41

Suggested Citation

Magni, Carlo Alberto and Marchioni, Andrea, The Accounting-And-Finance of a Solar Photovoltaic Plant: Economic Efficiency of a Replacement Project (March 12, 2019). 4th International Conference on Energy and Environment: bringing together Engineering and Economics, Guimarães, Portugal, 16-17 May 2019 , Available at SSRN: https://ssrn.com/abstract=3351150

Carlo Alberto Magni (Contact Author)

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering) ( email )

Italy

Andrea Marchioni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Economia Marco Biagi di Modena ( email )

Viale Berengario 52
Modena, Modena 41121
Italy

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