 Feed-in tariffs with minimum price guarantees and regulatory uncertaintyLuciana Barbosa, Paulo Ferrão, Artur Rodrigues and Alberto Sardinha Energy Economics, 2018, vol. 72, issue C, 517-541 Abstract: The feed-in tariff (FIT) program is a popular policy for incentivizing new renewable energy projects because it establishes a long-term contract with renewable energy investors. This paper presents a novel model to analyze a FIT contract with a minimum price guarantee (i.e., a price-floor regime) from an investor's perspective. The results show that a perpetual guarantee only induces investment for prices below the price floor when offering a risk-free investment opportunity. In contrast, the finite guarantee may induce investment even when the revenue from the guarantee is lower than the investment cost. When an investor faces a scenario with regulatory uncertainty, a higher and more likely reduction in the price floor induces earlier investment. For all cases, investors postpone an investment decision when market conditions present a higher price volatility. Keywords: Real options; Feed-in tariff; Price-floor regime; Regulatory uncertainty (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:72:y:2018:i:c:p:517-541 DOI: 10.1016/j.eneco.2018.04.028 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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