One of the largest benefits of renewable energy generation is reduced degradation of natural ecosystems as compared to fossil-based energy generation. However, incorporating this benefit into a competitive business model is difficult. This project captures the benefits of natural ecosystem preservation from solar energy production by using mathematical models to quantify valuable biological functions such as phosphorus removal or de-nitrification on a firm-level scale. These functions are then valued using option pricing theory to result in a new class of biological assets, which can be recognized on a generating company’s balance sheet.
In cooperation with Combined Power Cooperative, the research team has quantified the value of nitrogen cycling within the preserved ecosystem on a concentrated solar generation site located in southern California. They are now working on adapting financial accounting tools to formally recognize this asset class on the Combined Power Cooperative balance sheet.