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Many irreversible long-run capital investments entail opportunities for managers to respond flexibly to changes in the economic environment. However, common levelized cost measures used to guide decision-making, such as the levelized cost of electricity, implicitly assume that the values of random economic variables are known with certainty when investment decisions are made. This assumption implies, often incorrectly, that managerial flexibility carries zero value. This paper improves levelized cost measures by deriving an expansion that accounts for both uncertainties in relevant variables and the value of managerial flexibility in responding to them. This method is applied to quantify the value of flexibility in two example decision problems. In one, an operator of a natural gas electricity generation facility evaluates whether to invest in carbon capture capabilities. Another considers retirement decisions for U.S. nuclear plants. These examples illustrate that simplified cost metrics can inaccurately guide decision-making by inflating cost estimates relative to the proposed levelized cost measure that accounts for uncertainty and flexibility. [ABSTRACT FROM AUTHOR]

The authors estimate price-responsiveness of the residential customers with increasing residential PV penetration and project future electricity sales to the residential sector considering various future PV penetration scenarios. This projection is potentially useful for utilities in their resource planning and ratemaking processes as they formally incorporate the expected reduction in residential electricity demand due to increased penetration of distributed generation. [ABSTRACT FROM AUTHOR]