Energiewende @ Risk: On the Continuation of Renewable Power Generation at the End of Public Policy Support

Barbara Glensk and Reinhard Madlener
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Barbara Glensk: Institute for Future Energy Consumer Needs and Behavior (FCN), School of Business and Economics/E.ON Energy Research Center, RWTH Aachen University, Mathieustrasse 10, 52074 Aachen, Germany

Energies, 2019, vol. 12, issue 19, 1-25

Abstract: This paper aims to analyze what happens with renewable energy power plants, such as onshore wind, photovoltaics and biomass, when the public policy support based on the Renewable Energy Law expires. With its expiration, the first renewable energy (and especially onshore wind) power plants will have to be scrutinized as to whether they can economically continue operation, whether they have to be repowered, or whether they need to be decommissioned. The relative merits of these three alternatives are evaluated by applying real options analysis. In contrast to traditional project evaluation techniques, the real options approach takes advantage of the use of uncertain parameters included in the model, such as the development of the electricity price or electricity output. The results obtained suggest that parameters such as the level of future operation and maintenance costs, the expected development of the electricity price at the spot market, and the interrelations between these, as well as the development of the electricity output from renewables can significantly affect the profitability of these power plants and thus impact the decision about their further optimal operation.

Keywords: renewable energy; real options; energy market; policy support; repowering (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:12:y:2019:i:19:p:3616-:d:269624

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