Renewable Energy Investments with Storage: A Risk-Return Analysis

Krömer S, Gatzert N (2018)

Publication Type: Journal article, Original article

Publication year: 2018


DOI: 10.1108/ijesm-02-2018-0009


The aim of this paper is to study investments in renewable energy projects which are jointly operated with an energy storage system, with particular focus on risk-return characteristics from the perspective of private and institutional investors, taking into account resource risk, energy price risk, inflation risk, and policy risk. To this end, this article presents a stochastic discounted cash flow model which is then applied to a wind farm with a pumped hydro storage system. The results show that energy storage systems have the potential to increase the expected present value of future investment cash flows and to hedge (downside) risk. However, in order to realize this potential, storage systems have to be cost-effective in terms of fixed operation, maintenance, staffing and insurance costs. Also, several key factors are identified which have a considerable influence on the performance of the operation strategy. The paper contributes to the literature by conducting an analysis of (downside) risk and return of renewable energy investments with a storage system taking into account stochastic policy, resource, inflation, and energy price risk.

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Krömer, S., & Gatzert, N. (2018). Renewable Energy Investments with Storage: A Risk-Return Analysis. International Journal of Energy Sector Management.


Krömer, Sarah, and Nadine Gatzert. "Renewable Energy Investments with Storage: A Risk-Return Analysis." International Journal of Energy Sector Management (2018).

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