Evaluating Investments in Renewable Energy Under Policy Risks

Gatzert, Nadine; Vogl, Nikolai

doi:10.2139/ssrn.2675231

Cited by 5 publications

(2 citation statements)

References 49 publications

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“…, Radhakrishnan et al. ), energy (Gatzert and Vogl ) and highways (Mallick and Nazarian ). Therefore, we adopt ROA to describe the value volatility in climate adaptation infrastructures and propose a decision framework for investors to conduct an accurate financial evaluation and choose optimal investment timing for adaptation infrastructures.…”

Section: Literature Reviewmentioning

confidence: 99%

“…and determine the optimal investment time (Azevedo and Paxson 2014) or switch time (Kraft et al 2013, Tsekrekos andYannacopoulos 2016), and (ii) how to evaluate project value and enterprise value when considering uncertainty (Kouvelis and Tian 2014). The real options approach has been widely used in investment decision-making and risk management of various infrastructures such as water conservancy (Kontogianni et al 2014, Radhakrishnan et al 2017, energy (Gatzert and Vogl 2016) and highways (Mallick and Nazarian 2018). Therefore, we adopt ROA to describe the value volatility in climate adaptation infrastructures and propose a decision framework for investors to conduct an accurate financial evaluation and choose optimal investment timing for adaptation infrastructures.…”

Section: Literature Reviewmentioning

confidence: 99%

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A Real Options‐Based Decision‐Making Model for Infrastructure Investment to Prevent Rainstorm Disasters

Wang

Liu

Zhang

et al. 2019

Production and Operations Management

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Extreme precipitation caused by global climate change is expected to have a severe impact on urbanized areas. While decision‐makers struggle with climate uncertainty, an effective infrastructure adaptation strategy attaches great importance to preventing disasters resulting from rainfall. We propose a decision‐making model to incorporate the probability of rainfall disasters and recommend investing time when evaluating projects related to climate adaptation. We use a hydrological statistical model and economic and technical factors to estimate the expected economic losses in several rainfall disaster scenarios, and the value of the adaptation infrastructures is calculated using a real options pricing approach. Then the decision‐making model is applied to a case study involving a campus rainfall disaster prevention facility at the Central University of Finance and Economics in Beijing, China. We established three submerged scenarios with different rainfall intensities, then we evaluated the premium of holding an option to defer and pointed out the optimal investing time in each scenario. This model is expected to provide guidance for the development of adaptation infrastructure for relatively small areas such as communities and universities. And we proved that using real options‐based approach could provide more managerial flexibility for investors.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

A Real Options‐Based Decision‐Making Model for Infrastructure Investment to Prevent Rainstorm Disasters

Wang

Liu

Zhang

et al. 2019

Production and Operations Management

View full text Add to dashboard Cite

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Risk-based analysis and policy implications for renewable energy investments in Greece

et al. 2017

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Significant renewable energy (RE) investments have to be realized in order to achieve the ambitious RE targets set in the EU for 2020 and beyond. Moreover, a great amount of capital has to be leveraged, as these projects are followed by high investment and financing costs. Main aim of this paper is the provision of a comprehensive assessment of the existing risk elements of RE investments in relation to the respective policies and the evaluation of their impact on the weighted average cost of capital (WACC) in Greece. A significant consultation with key national energy stakeholders took also place, including policy makers, project developers, investors, equity providers, bankers and energy analysts in the Greek RE market, in order to provide a validation of the respective results. It has been concluded that the policy design risk represents the risk element with the greatest impact on the cost of capital and, thus, the level of RE investments' deployment. Moreover, based on the cost of capital valuation process followed, the WACC was estimated to reach approximately 12% for onshore wind and little lower values for solar PV projects in Greece.

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