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Using real estate market fundamentals to determine the correct discount rate for decentralised energy investments

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en
dc.contributor.author Leskinen, Niina
dc.contributor.author Vimpari, Jussi
dc.contributor.author Junnila, Seppo
dc.date.accessioned 2020-02-03T09:02:25Z
dc.date.available 2020-02-03T09:02:25Z
dc.date.issued 2020-02-01
dc.identifier.citation Leskinen , N , Vimpari , J & Junnila , S 2020 , ' Using real estate market fundamentals to determine the correct discount rate for decentralised energy investments ' , Sustainable Cities and Society , vol. 53 , 101953 . https://doi.org/10.1016/j.scs.2019.101953 en
dc.identifier.issn 2210-6707
dc.identifier.issn 2210-6715
dc.identifier.other PURE UUID: c693923e-d2f9-4c27-8515-d849e53baa75
dc.identifier.other PURE ITEMURL: https://research.aalto.fi/en/publications/c693923e-d2f9-4c27-8515-d849e53baa75
dc.identifier.other PURE LINK: http://www.scopus.com/inward/record.url?scp=85076103219&partnerID=8YFLogxK
dc.identifier.other PURE FILEURL: https://research.aalto.fi/files/40615707/1_s2.0_S2210670719316956_main.pdf
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/42945
dc.description.abstract Decentralised renewable energy production (on-site energy) is potentially more profitable than commonly believed, especially in urban areas characterized with well-functioning real estate markets and low property yields. Traditional calculation methods, such as the levelized cost of energy, ignore the value on-site energy production can create to property owners through capitalizing the decreased energy costs. Past research has found that these methods are very sensitive to the discount rate, whose selection is very difficult. Evaluating the profitability of on-site energy as part of the underlying property has two major benefits: property yields, defined by real estate markets, can be used as accurate discount rates and economic value created to the property owner is quantified. To justify the use of property yields, risk profiles of energy and property investments are compared in this paper. Subsequently, a theoretical framework of on-site energy investment risks is created and demonstrated with geographical information system analysis modelling the profitability of rooftop photovoltaics in all buildings in the city of Vantaa, Finland. The findings question the traditional way of equalising the discount rates of on-site energy investments in larger geographical areas and suggest that property yields can be used as discount rates for on-site energy investments. en
dc.format.mimetype application/pdf
dc.language.iso en en
dc.publisher Elsevier BV
dc.relation.ispartofseries Sustainable Cities and Society en
dc.relation.ispartofseries Volume 53 en
dc.rights openAccess en
dc.title Using real estate market fundamentals to determine the correct discount rate for decentralised energy investments en
dc.type A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä fi
dc.description.version Peer reviewed en
dc.contributor.department Department of Built Environment
dc.contributor.department Real Estate
dc.subject.keyword Discount rate
dc.subject.keyword Distributed renewable energy investment
dc.subject.keyword On-site energy production
dc.subject.keyword Property yield
dc.subject.keyword Risk premium
dc.subject.keyword Rooftop photovoltaics
dc.identifier.urn URN:NBN:fi:aalto-202002032025
dc.identifier.doi 10.1016/j.scs.2019.101953
dc.type.version publishedVersion

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