Investment Opportunities, Uncertainty, and Renewables in European Electricity Markets
Gugler K, Haxhimusa A, Liebensteiner M, Schindler N (2019)
Publication Language: English
Publication Type: Journal article
Publication year: 2019
Journal
Book Volume: 20
Pages Range: 1-16
DOI: 10.1016/j.eneco.2019.104575
Abstract
We investigate investment decisions in electricity generation technologies under uncertainty. The econometric analysis is based on a vast dataset of electricity generation capacities of virtually all European power plants, which we combine with disaggregated measures of investment opportunities and uncertainty. Our approach allows for a disaggregated analysis at the asset level (i.e. different electricity generation technologies) of the firm. Across technologies, we find investment to follow market incentives despite sunk and irreversible capital, confirming the implications of the Tobin's q-model. Asset-specific uncertainty hinders investment in conventional technologies, especially in peak-load assets, while industry uncertainty even triggers investment. Given that renewable power replaces peak-load generation technologies and that investment incentives decrease over time, our results indicate that there may be under-investment in the long run.
Authors with CRIS profile
Mario Liebensteiner
Juniorprofessur für Wirtschaftswissenschaften (Energiemärkte und Energiesystemanalyse)
Involved external institutions
Austria (AT)How to cite
APA:
Gugler, K., Haxhimusa, A., Liebensteiner, M., & Schindler, N. (2019). Investment Opportunities, Uncertainty, and Renewables in European Electricity Markets. Energy Economics, 20, 1-16. https://dx.doi.org/10.1016/j.eneco.2019.104575
MLA:
Gugler, Klaus, et al. "Investment Opportunities, Uncertainty, and Renewables in European Electricity Markets." Energy Economics 20 (2019): 1-16.
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