Flexible Valuation of Photovoltaic Projects in Healthcare Institutions in Colombia: A Real Options-Based Approach

Abstract

This article presents a real options method to value photovoltaic installations in public hospitals in Colombia. It uses a binomial model adapted to local conditions and tests three decisions that matter in practice: postponing an installation, expanding capacity after early evidence, and rolling out in phases. The cases come from two healthcare providers in Barranquilla, which gives the analysis a concrete setting. The study follows a quantitative design with an applied focus. It works with variables used in routine planning: the initial outlay, projected electricity savings, a risk free rate drawn from local government bonds, volatility estimated from recent tariff movements, and the agreed time horizon. Real-options estimates used the same cash-flow inputs as the baseline NPV, so the comparison is like-for-like. Waiting lifted value by about $100,000 USD, since the team orders only after the tariff bulletin and a supplier’s price/lead time are confirmed. A phased rollout added roughly $125,000 USD: start small, meter output, review costs, then add capacity only if checks hold. Simulations drew on ranges observed in hospital projects, not a single toy case. Results also show uneven regional uptake and that flexible appraisal helps teams work within technical limits, procurement rules, and tight budgets. Practically: train teams, update evaluation rules to admit staged choices, and use real options alongside standard indicators. Train technical teams in option based valuation so scenarios and decision points are specified clearly. Update evaluation rules so staged decisions are admissible in formal reviews. Use real options alongside familiar indicators when assessing public health energy projects, so the appraisal reflects the way decisions are actually taken as information arrives.