Support mechanisms for renewables: How risk exposure influences investment incentives

Lena Kitzing () and Christoph Weber ()
Additional contact information
Christoph Weber: Chair for Management Sciences and Energy Economics, University of Duisburg-Essen

No 1403, EWL Working Papers from University of Duisburg-Essen, Chair for Management Science and Energy Economics

Abstract: We analyse quantitatively how risk exposure from different support mechanisms, such as feed-in tariffs and premiums, can influence the investment incentives for private investors. We develop a net cash flow approach that takes systematic and unsystematic risks into account through cost of capital and the Capital Asset Pricing Model as well as through active liquidity management. Applying the model to a specific case, a German offshore wind park, we find that the support levels required to give adequate investment incentives are for a feed-in tariff scheme approximately 5-7% lower than for a feed-in premium scheme. The effect of differences in risk exposure from the support schemes is significant and cannot be neglected in policy making, especially when deciding between support instruments or when determining adequate support levels.

Keywords: investment risk; support policies; unsystematic risk; liquidity management; offshore wind; feed-in tariffs (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-ene, nep-eur, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.wiwi.uni-due.de/fileadmin/fileupload/BW ... stmentIncentives.pdf First version, 2014 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dui:wpaper:1403

Access Statistics for this paper

More papers in EWL Working Papers from University of Duisburg-Essen, Chair for Management Science and Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by Andreas Fritz ().