Enhancing Understanding of Project Valuation of Energy Transition through Hybrid Power Plants

Abstract

 Hybrid power plants, which combine renewable energy sources such as photovoltaic solar and wind power with storage systems, offer a promising solution for improving energy reliability, reducing emissions, and accelerating the energy transition. However, their development is complex due to the integration of multiple energy sources, grid parity challenges, and the variety of potential risks involved. Therefore, this type of power plant requires a project valuation approach that addresses beyond techno-economic aspects such as risks and uncertainties due to intermittent conditions. This study explores and examines best practices and current insights into project valuation approaches for hybrid power plants, while also highlighting gaps in existing research and future research direction. The analysis reveals that most research primarily focuses on deterministic approaches of economic analyses, which have been predominantly used in the field. A deterministic approach provides a single specific value of economic estimation. However, we found that recent studies have highlighted the limitation of such approach in incorporating uncertainties and risks. Therefore, our findings suggest the need for further research to incorporate uncertainties and to adopt models such as stochastic approaches that better reflect the spectrum of potential outcomes.