Using DNPV for valuing investments in the energy sector: A solar project case study

In this paper, a practical application of a valuation method that decouples the time value of money from the risk associated with the project is used to value an investment on a solar project. The proposed method is termed decoupled net present value (DNPV). A simple investment renewable energy project is presented using both the traditional NPV techniques and the proposed DNPV. The proposed methodology provides a consistent valuation method free from the problems typically associated with the application of traditional NPV and, more importantly, it allows a seamless integration of project risk assessment performed by technical experts and risk management implemented by business executives into the financial evaluation of the project.