The solar PV-based microgrid, as a new mode of production and consumption of clean energy, backs up the variability of renewables and has important implications for mitigating global climate change. However, its further development is limited because of the high cost and uncertainty, which discourages its operators’ investment willingness. To guide capital investment in microgrids, we construct a real options model to investigate the flexible investment of operators and the optimal incentive contract under uncertainty. The real options method can more accurately measure the value of real assets in an uncertain environment, and help decision-makers to assess investment costs and benefits. Moreover, a demonstration project in Hefei, China is provided as a case study to analyze the impact of the peak-valley price rates and cost changes on the incentive contract. The results demonstrate that subsidies are still necessary to accelerate the development of solar PV-based microgrids. However, subsidies in Hefei can be stopped until the investment cost drops to 6101.25 RMB/kW. Alleviating the cost pressure on operators can stimulate them to adopt the solar PV-based microgrid, but rapid cost reductions and fluctuations could hinder its development. We further uncover that raising the peak-valley price rate can help to reduce the government's financial burden caused by subsidies.