Valuation for renewable energy: A comparative review

Environmental cost-benefit analysis is applied for the evaluation of renewable energy projects. Since some benefits and costs do not have monetary values, economic valuation techniques are applied to estimate them. This paper reviews the literature on the valuation/evaluation of renewable energy resources and summarizes the methods used in them. It discerns four main streams of valuation in renewable energy. The first is economic, welfare oriented and comprises stated and revealed preference methods; the second is the financial option analysis with a financial background; the third is emergy analysis, which is mostly an ecological engineering-based method with capable economic links, and the fourth is again economic but not welfare based. The paper discusses the main directions discerned in these studies and recognizes first that proper valuation takes place only in the first method while the other methods describe only evaluation procedures and second that there is a research gap that has yet to be filled in as compared to other areas of environmental, resource and energy economics. (C) 2007 Elsevier Ltd. All rights reserved.