Strategic real options and flexibility analysis for solar PV power plants

Solar photovoltaic (PV) generation capacity has expanded significantly over the past two decades, yet its long-term deployment remains exposed to regulatory uncertainty, volatile technology costs, and growing curtailment risks due to growing deployment of other types of variable renewable-based power plants. This study develops a novel decision-support framework that integrates real options–based decision rules with Monte Carlo simulation to optimize technology selection, system design, and deployment strategies for utility-scale solar PV projects under uncertainty. The framework quantifies the value of strategic flexibility in investment timing and capacity expansion. A case study in Portugal evaluates three design configurations for PV integration: fixed, phased, and flexible. Performance is assessed using the levelized cost of electricity (LCOE). Results show that the flexible design, enabling staged deployment and scalable capacity, can reduce expected LCOE by up to 14.6% relative to a fixed design, due to the mitigation of generation uncertainty and associated downside economic risk. The findings underscore the importance of incorporating flexibility in PV planning to enhance resilience in uncertain energy markets.