Feed-in tariffs with minimum price guarantees and regulatory uncertainty

Detalhes bibliográficos
Autor(a) principal: Barbosa, Luciana
Data de Publicação: 2018
Outros Autores: Ferrao, Paulo, Rodrigues, Artur, Sardinha, Alberto
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: https://hdl.handle.net/1822/65731
Resumo: The feed-in tariff (FIT) program is a popular policy for incentivizing new renewable energy projects because it establishes a long-term contract with renewable energy investors. This paper presents a novel model to analyze a FIT contract with a minimum price guarantee (i.e., a price-floor regime) from an investor's perspective. The results show that a perpetual guarantee only induces investment for prices below the price floor when offering a risk-free investment opportunity. In contrast, the finite guarantee may induce investment even when the revenue from the guarantee is lower than the investment cost. When an investor faces a scenario with regulatory uncertainty, a higher and more likely reduction in the price floor induces earlier investment. For all cases, investors postpone an investment decision when market conditions present a higher price volatility. (C) 2018 Elsevier B.V. All rights reserved.
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spelling Feed-in tariffs with minimum price guarantees and regulatory uncertaintyReal optionsFeed-in tariffPrice-floor regimeRegulatory uncertaintySocial SciencesThe feed-in tariff (FIT) program is a popular policy for incentivizing new renewable energy projects because it establishes a long-term contract with renewable energy investors. This paper presents a novel model to analyze a FIT contract with a minimum price guarantee (i.e., a price-floor regime) from an investor's perspective. The results show that a perpetual guarantee only induces investment for prices below the price floor when offering a risk-free investment opportunity. In contrast, the finite guarantee may induce investment even when the revenue from the guarantee is lower than the investment cost. When an investor faces a scenario with regulatory uncertainty, a higher and more likely reduction in the price floor induces earlier investment. For all cases, investors postpone an investment decision when market conditions present a higher price volatility. (C) 2018 Elsevier B.V. All rights reserved.The authors gratefully acknowledge the anonymous reviewers for the many useful suggestions that greatly improved this article. This work was supported by a PhD scholarship provided by Fundacao para a Ciencia e a Tecnologia (FCT) through the MIT Portugal program under project SFRH/BD/52086/2013, and was supported by national funds through Fundacao para a Ciencia e a Tecnologia (FCT) with reference UID/CEC/50021/2013. In addition, this work was carried out within the funding with COMPETE reference no POCI-01-0145-FEDER-006683 (UID/ECO/03182/2013), with the FCT/MEC's (Fundacao para a Cincia e a Tecnologia, I.P.) financial support through national funding and by the ERDF through the Operational Programme on "Competitiveness and Internationalization - COMPETE 2020" under the PT2020 Partnership Agreement.Elsevier Science BVUniversidade do MinhoBarbosa, LucianaFerrao, PauloRodrigues, ArturSardinha, Alberto2018-05-012018-05-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/1822/65731engBarbosa, L., Ferrão, P., Rodrigues, A., & Sardinha, A. (2018, May). Feed-in tariffs with minimum price guarantees and regulatory uncertainty. Energy Economics. Elsevier BV. http://doi.org/10.1016/j.eneco.2018.04.0280140-988310.1016/j.eneco.2018.04.028info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T12:49:57Zoai:repositorium.sdum.uminho.pt:1822/65731Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T19:48:33.949874Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Feed-in tariffs with minimum price guarantees and regulatory uncertainty
title Feed-in tariffs with minimum price guarantees and regulatory uncertainty
spellingShingle Feed-in tariffs with minimum price guarantees and regulatory uncertainty
Barbosa, Luciana
Real options
Feed-in tariff
Price-floor regime
Regulatory uncertainty
Social Sciences
title_short Feed-in tariffs with minimum price guarantees and regulatory uncertainty
title_full Feed-in tariffs with minimum price guarantees and regulatory uncertainty
title_fullStr Feed-in tariffs with minimum price guarantees and regulatory uncertainty
title_full_unstemmed Feed-in tariffs with minimum price guarantees and regulatory uncertainty
title_sort Feed-in tariffs with minimum price guarantees and regulatory uncertainty
author Barbosa, Luciana
author_facet Barbosa, Luciana
Ferrao, Paulo
Rodrigues, Artur
Sardinha, Alberto
author_role author
author2 Ferrao, Paulo
Rodrigues, Artur
Sardinha, Alberto
author2_role author
author
author
dc.contributor.none.fl_str_mv Universidade do Minho
dc.contributor.author.fl_str_mv Barbosa, Luciana
Ferrao, Paulo
Rodrigues, Artur
Sardinha, Alberto
dc.subject.por.fl_str_mv Real options
Feed-in tariff
Price-floor regime
Regulatory uncertainty
Social Sciences
topic Real options
Feed-in tariff
Price-floor regime
Regulatory uncertainty
Social Sciences
description The feed-in tariff (FIT) program is a popular policy for incentivizing new renewable energy projects because it establishes a long-term contract with renewable energy investors. This paper presents a novel model to analyze a FIT contract with a minimum price guarantee (i.e., a price-floor regime) from an investor's perspective. The results show that a perpetual guarantee only induces investment for prices below the price floor when offering a risk-free investment opportunity. In contrast, the finite guarantee may induce investment even when the revenue from the guarantee is lower than the investment cost. When an investor faces a scenario with regulatory uncertainty, a higher and more likely reduction in the price floor induces earlier investment. For all cases, investors postpone an investment decision when market conditions present a higher price volatility. (C) 2018 Elsevier B.V. All rights reserved.
publishDate 2018
dc.date.none.fl_str_mv 2018-05-01
2018-05-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://hdl.handle.net/1822/65731
url https://hdl.handle.net/1822/65731
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Barbosa, L., Ferrão, P., Rodrigues, A., & Sardinha, A. (2018, May). Feed-in tariffs with minimum price guarantees and regulatory uncertainty. Energy Economics. Elsevier BV. http://doi.org/10.1016/j.eneco.2018.04.028
0140-9883
10.1016/j.eneco.2018.04.028
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Elsevier Science BV
publisher.none.fl_str_mv Elsevier Science BV
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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