The paradox effects of uncertainty and flexibility on investment in renewables under governmental support

Andreas Welling

European Journal of Operational Research, 2016, vol. 251, issue 3, 1016-1028

Abstract: Given that companies have the flexibility to decide about size and timing of a renewable electricity investment, the existence of four paradox effects is proven: Only the type but not the amount of governmental support has an influence on the optimal capacity of a renewable electricity generating system. A decrease of governmental support over time may result in higher capacities of renewables installed on an industry level, at least on the short term. Likewise, higher uncertainty may encourage an expansion of these capacities. In contrast, technological progress may hamper the expansion of capacities. Finally, these four paradox effects are exemplified in a Germany-based case study regarding a photovoltaic project.

Keywords: Optimal investment timing; Optimal capacity size; Real options; OR in energy; OR in environment and climate change (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:251:y:2016:i:3:p:1016-1028

DOI: 10.1016/j.ejor.2015.12.027

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