Low Carbon Urban Infrastructure Investment in Asian Cities

RENEWABLE ENERGY INVESTMENT RISK ANALYSIS FOR LOW-CARBON CITY... 23

0.04

0.03

0.02

0.01

0.00

NPV

0 100.000 200.000 300.000 400.000 500.000

Probability

Certainty =62.53%

Certainty Min = −8,846

−400.000 −300.000−200.000−100.000

Fig. 2.2 Household NPV distribution for FIT of 42 JPY/kWh for a 20-year
period. Source: Author

over 20 years are expected in a range of 34,094 to 37,770  t-CO 2 per
household from business as usual (BaU). The CO 2 emission reductions
are estimated using the amount of electricity generation from solar PV per
household simulated by the Monte Carlo model and CO 2 emission inten-
sity from electricity as of 2014 (0.464 kgCO 2 /kWh). The accumulated
electricity fees estimating from the amount of electricity generated from
solar PV decline over 20 years range from 1.93 million to 3.48 million JPY
by means of household FIT system installation.

2.5.2 Commercial Sector

The commercial cash flow analysis results show that the IRR base case
for investing in 50 kW of solar PV falls below the 3 % discount rate at
2.2 % and 2.1 % for immediate and normal depreciations, respectively,
in case of 40 JPY/kWh fixed payment for 20 years (Table 2.4). In the
simulation, the IRR value exceeds the discount rate by more than 20 %
and by less than 20 % in the cases of immediate depreciation and nor-
mal depreciation, respectively. In terms of NPV, immediate depreciation
ranges from roughly −6.36 million to 5 million JPY and normal depre-
ciation ranges from −6.81 million to 4.24 million JPY, although the base
case presents a negative value (Fig. 2.4). The probability of generating
positive revenues over 20 years is 20 % in the case of immediate deprecia-
tion and 10 % in the case of normal depreciation. However, the tax policy