Land-Use Change and Solar Energy Production: A Real Option Approach

20 Pages Posted: 25 Jan 2012 Last revised: 22 Mar 2015

See all articles by Ardjan Gazheli

Ardjan Gazheli

Universitat Autònoma de Barcelona

Luca Di Corato

Ca Foscari University of Venice - Dipartimento di Economia

Date Written: January 23, 2012

Abstract

In this paper a real option model is developed to examine the critical factors affecting the decision to lease agricultural land to a company installing a PV power plant. The leasing payment is certain while the net revenues from agriculture are uncertain. We identify the profit values at which the farmer decides to lease his plot vs. continue farming it. By applying the model to the province of Bologna (Italy), we illustrate the possible land-use change scenarios in this area. We conclude by discussing the importance of PV energy production as a source of income for farmers and its implications from a social perspective.

Keywords: Land Allocation, Real Options, Renewable Energy, Solar farm, Uncertainty

JEL Classification: C61, D81, Q24, Q42

Suggested Citation

Gazheli, Ardjan and Di Corato, Luca, Land-Use Change and Solar Energy Production: A Real Option Approach (January 23, 2012). FEEM Working Paper No. 90.2011, Available at SSRN: https://ssrn.com/abstract=1990148 or http://dx.doi.org/10.2139/ssrn.1990148

Ardjan Gazheli (Contact Author)

Universitat Autònoma de Barcelona ( email )

Edifici Cn - Campus UAB - QC 3091
Bellaterra, Barcelona 08193
Spain

Luca Di Corato

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
188
Abstract Views
1,177
Rank
290,726
PlumX Metrics