Investor Type Heterogeneity in Bottom-Up Optimization Models

Valeriya Azarova and Mathias Mier

No 362, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Bottom-up optimization models neglect the inclusion of investment behavior We introduce three investor types that differ in their investment cost specifications, financing costs, and discounting. This leads to a substantially different pace and rate of adoption for specific generation technologies. For the European power market, 2050 wind (nuclear, gas-CCS) capacity ranges from 624 to 1,113 GW (84 to 194 GW, 383 to 502 GW), depending on the respective investor type. Accounting for type heterogeneity leads to 2050 wind (nuclear, gas-CCS) capacity of 912 GW (140 GW, 428 GW). Technologyspecific financing cost increase 2050 wind (nuclear, gas-CCS) capacity even to 1,069 GW (80 GW, 449 GW). Hence, our results confirm that accounting for more differentiated picture of electricity market investment with heterogeneous investor types can provide a starting point for tailor-made energy policies, thereby increasing the efficiency and effectiveness of public policies fostering the decarbonization of power markets.

Keywords: Investment behavior; investor type; investment cost; energy system model; bottom-up optimization model; power market model (search for similar items in EconPapers)
JEL-codes: C61 C68 Q40 Q41 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-ene and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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