Optimal Structuring of Investments in Electricity Generation Projects in Colombia with Non-Conventional Energy Sources

Abstract

Taking full advantage of fiscal and economic incentives has become a complex process for investors, who must find the right portfolio or capital structure to obtain viable and competitive generation projects. In this context, this paper proposes a methodology for the optimal structuring of investments in non-conventional energy sources (NCRES) considering fiscal and economic incentives. Three methods were evaluated: (1) levelized cost of electricity (LCOE) combined with three metaheuristic techniques; (2) discounted cash flow (DCF) with Monte Carlo simulation and value at risk (VaR); and (3) real options with Black and Scholes. The proposed approach presents as the main financial indicator the generation cost (GC), as well as three other financial indicators, namely: net present value (NPV), value at risk (VaR) and net present value for real options (NPVRO). The propose approach allows for defining different investment portfolios from where an investor can choose; each of which minimizes the GC. Furthermore, the methodology can be adapted to countries with different policies and fiscal incentives for the development of NCRES projects. The results show that for each metaheuristic, an optimal capital structure that minimizes GC is obtained; in this way, a GC of 0.032 (USD/kWh) is achieved for solar photovoltaic technology, with a reduction of 49.2%, when tax incentives are considered.