Solar Power Profitability with Demand Response and Carbon-Corrected Electricity Prices

36 Pages Posted: 31 Mar 2020

See all articles by Hannu Huuki

Hannu Huuki

University of Oulu - Department of Economics, Accounting and Finance; Government of the Republic of Finland - Finnish Environment Institute

Santtu Karhinen

Government of the Republic of Finland - Finnish Environment Institute

Herman Böök

Government of the Republic of Finland - Finnish Meteorological Institute

Chao Ding

Department of Economics, Accounting and Finance

Enni Ruokamo

Government of the Republic of Finland - Finnish Environment Institute

Date Written: February 17, 2020

Abstract

We study the economic profitability of small-scale photovoltaic (PV) systems in the insolation conditions close to the Arctic Circle. We show moderate rate of returns (1.0 % in the Northern and 1.4 % in the Southern Finland) for the PV system investments with time-of-use hot water heating. Optimized hot water heating increases the rate of return by 0.6 percentage points. We internalize the negative externalities of greenhouse gas emissions from electricity generation by presenting the hourly electricity prices as a function of emission permit costs. A 10 €/tCO2 increase in carbon price improves the PV investment rate of return by 0.3 percentage points.

Keywords: Solar PV, Demand response, Social cost of carbon

JEL Classification: Q41, D10, C61

Suggested Citation

Huuki, Hannu and Karhinen, Santtu and Böök, Herman and Ding, Chao and Ruokamo, Enni, Solar Power Profitability with Demand Response and Carbon-Corrected Electricity Prices (February 17, 2020). Available at SSRN: https://ssrn.com/abstract=3539522 or http://dx.doi.org/10.2139/ssrn.3539522

Hannu Huuki (Contact Author)

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

Santtu Karhinen

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

Herman Böök

Government of the Republic of Finland - Finnish Meteorological Institute ( email )

P.O.Box 503
FIN-00101 Helsinki
Finland

Chao Ding

Department of Economics, Accounting and Finance ( email )

P.O. Box 4600
Oulu, 90014
Finland

Enni Ruokamo

Government of the Republic of Finland - Finnish Environment Institute ( email )

Latokartanonkaari 11
Helsinki, 00790
Finland

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