Risk Assessment of Investments in Energy-only and Capacity Markets

Christian Growitsch, Lisa Just and Burkhard Pedell

Die Unternehmung - Swiss Journal of Business Research and Practice, 2014, vol. 68, issue 3, 181-188

Abstract: This paper addresses the long term challenges of electricity markets. First, the economic theory of the missing money problem is outlined. Additionally, a risk assessment of different market designs is pursued. Finally, we will conclude that both market and regulatory risks are important issues of the discussion. Due to the relatively high complexity of capacity markets it can be expected that there will be changes to the market design and to relevant parameters - in particular shortly after the first implementation of such mechanisms. This might increase the uncertainty perceived by investors. However, if the period of validity is long enough, i.e. the investors can calculate with a relatively stable revenue stream, a capacity market might be an instrument for reducing the risks perceived by investors and hence for facilitating the financing of investments in new energy generation capacity.

Date: 2014
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DOI: 10.5771/0042-059X-2014-2-181

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Die Unternehmung - Swiss Journal of Business Research and Practice is currently edited by Prof. Dr. Artur Baldauf, Universität Bern, Prof. Dr. Manfred Bruhn, Universität Basel, Prof. Dr. Pascal Gantenbein, Universität Basel (geschäftsführend), Prof. Dr. Markus Gmür, Universität Fribourg, Prof. Dr. Klaus Möller, Universität St. Gallen, Prof. Dr. Günter Müller-Stewens, Universität St. Gallen, Prof. Dr. Dr. h.c. Margit Osterloh, Universität Zürich, Prof. Dr. Dieter Pfaff, Universität Zürich and Prof. Dr. Martin Wallmeier, Universität Fribourg

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