Economic and Regulatory Uncertainty in Renewable Energy System Design: A Review

Àlex Alonso-Travesset (), Diederik Coppitters, Helena Martín and Jordi de la Hoz
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Àlex Alonso-Travesset: Department of Electrical Engineering, Barcelona East School of Engineering, Universitat Politècnica de Catalunya, 08019 Barcelona, Spain
Diederik Coppitters: Institute of Mechanics, Materials and Civil Engineering (iMMC), Université Catholique de Louvain (UCLouvain), 1348 Ottignies-Louvain-la-Neuve, Belgium
Helena Martín: Department of Electrical Engineering, Barcelona East School of Engineering, Universitat Politècnica de Catalunya, 08019 Barcelona, Spain
Jordi de la Hoz: Department of Electrical Engineering, Barcelona East School of Engineering, Universitat Politècnica de Catalunya, 08019 Barcelona, Spain

Energies, 2023, vol. 16, issue 2, 1-30

Abstract: Renewable energy is increasingly mobilizing more investment around the globe. However, there has been little attention to evaluating economic and regulatory (E&R) uncertainties, despite their enormous impact on the project cashflows. Consequently, this review analyzes, classifies, and discusses 130 articles dealing with the design of renewable energy projects under E&R uncertainties. After performing a survey and identifying the selected manuscripts, and the few previous reviews on the matter, the following innovative categorization is designed: sources of uncertainty, uncertainty characterization methods, problem formulations, solution methods, and regulatory frameworks. The classification reveals that electricity price is the most considered source of uncertainty, often alone, despite the existence of six other equally influential groups of E&R uncertainties. In addition, real options and optimization arise as the two main approaches researchers use to solve problems in energy system design. Subsequently, the following aspects of interest are discussed in depth: how modeling can be improved, which are the most influential variables, and potential lines of research. Conclusions show the necessity of modeling E&R uncertainties with currently underrepresented methods, suggest several policy recommendations, and encourage the integration of prevailing approaches.

Keywords: uncertainty; renewable energy; electricity price; real options; optimization; energy policy (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: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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