Study on Behavioral Decision Making by Power Generation Companies Regarding Energy Transitions under Uncertainty

Ryosuke Gotoh, Tetsuo Tezuka and Benjamin C. McLellan
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Ryosuke Gotoh: Graduate School of Energy Science, Kyoto University, Kyoto 606-8501, Japan
Tetsuo Tezuka: Graduate School of Energy Science, Kyoto University, Kyoto 606-8501, Japan
Benjamin C. McLellan: Graduate School of Energy Science, Kyoto University, Kyoto 606-8501, Japan

Energies, 2022, vol. 15, issue 2, 1-29

Abstract: With respect to decision making by companies, normative approaches such as the net present value (NPV) method are widely applied, even though it is known that investors may make non-normative decisions. This study aimed to obtain new information on the decision-making behavior of renewable energy (RE) companies under uncertainty in the energy market, which is not provided by the conventional normative approach. In this study, we designed a novel framework that expressed both normative and non-normative perspectives of decision making, and developed a behavioral decision-making model of a power generation company investing in large-scale RE (RE company). We also examined the decisions of the RE company under uncertainty in the energy market using the developed model, considering the Kansai region in Japan as an example study area. As a result, compared to the conventional NPV method, we obtained the following information: (i) heavy investments in either photovoltaics (PV) or wind resulted in decreased variable renewable energy (VRE) capacity, even though financial support was sufficient; (ii) balanced investments in both PV and wind yielded a larger VRE capacity in cases where financial support was sufficient; and (iii) co-worker’s suggestions that lowered the decision-makers’ reference point (RFP) encouraged VRE investments despite insufficient financial support.

Keywords: renewable energy; energy transition; decision making by companies; behavioral decision (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: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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