What are retail investors' risk-return preferences towards renewable energy projects? A choice experiment in Germany

Sarah Salm, Stefanie Lena Hille and Rolf Wüstenhagen

Energy Policy, 2016, vol. 97, issue C, 310-320

Abstract: Citizens own nearly half the renewable energy generation capacity in Germany and have been important drivers of the country's energy transition. In contrast to citizens' important role in financing renewable energies, the energy policy and economics literature has traditionally focused on other investors, such as incumbent energy firms. To close this gap, this paper reports on a large-scale survey of 1,990 German retail investors. Conducting a choice experiment with the subset of 1,041 respondents who expressed an interest in investing in community renewable energy projects, we present a unique dataset allowing for new insights in risk-return expectations of retail investors. We find that apart from return on investment, respondents are particularly sensitive to the minimum holding period and the issuer of community renewable energy investment offerings. A minimum holding period of 10 years implies a risk premium of 2.76% points. A subsequent segmentation analysis shows that two groups of potential community renewable energy investors with different risk-return expectations can be identified: “local patriots” and “yield investors”. In contrast to professional investors, a majority of retail investors use simple decision rules such as calculating payback time or relying on their gut feeling when making investments.

Keywords: Community finance; Energy cooperative; Choice experiment; Social acceptance; Investment decision; Retail investor (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:97:y:2016:i:c:p:310-320

DOI: 10.1016/j.enpol.2016.07.042

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