Economic Appraisal of Solar Energy Projects under Uncertainty using a Fuzzy Real OptionApproach(Case Study: A 2MW Photovoltaic Plant in the South of Isfahan)

Investment in renewable energies especially solar energies encounters numerous uncertainties considering the increased dynamism in economic and financial conditions. It is thus important to use modern methods of economic appraisal for such investments. Our study provides a framework for use of the real option theory for economic appraisal of a 2MW photovoltaic plant in Isfahan province (as a case study) in comparison with traditional methods. We first distribute self-made questionnaires to a sample of 36 experts, to test the impact of different  options on project value with the help of statistical methods.  We used Cronbachchr('39')s alpha coefficient to test the validity of our 9 item questionnaire. Our results indicated a significant relationship between the use of real option and increased value of investment in this plant considering expansion, termination and deferral options. We compared the results of our options between use of traditional methods and real option approach with the help of Fuzzy Binomial lattice. We observed that the fuzzy real option approach leads to increased value of investment and offers greater flexibility than traditional methods. JEL Classification: Q20, G11, G31,C02 Keywords: Photovoltaic Solar Plant, Uncertainty, Real Option, Fuzzy Logic, Binomial lattice.