Economic feasibility of energy efficiency improvements in street lighting systems in Rome

Strategic options and flexibility are introduced in the project. Specifically, it is considered the possibility of splitting LED investment into five stages, deciding whether each part should be implemented. Real options are used to evaluate the economic cost-saving of such a project, considering uncertainty of the electricity price and multi-stage investment. The economic value obtained from real option analysis is higher of that obtained from net present value because the latter does not consider some flexibilities of the project. Taking into account the sources of uncertainty, real options provide results that are more realistic.