Risk implications of renewable support instruments: Comparative analysis of feed-in tariffs and premiums using a mean-variance approach

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    Different support instruments for renewable energy expose investors differently to market risks. This has implications on the attractiveness of investment. We use mean-variance portfolio analysis to identify the risk implications of two support instruments: feed-in tariffs and feed-in premiums. Using cash flow analysis, Monte Carlo simulations and mean-variance analysis, we quantify risk-return relationships for an exemplary offshore wind park in a simplified setting. We show that feedin tariffs systematically require lower direct support levels than feed-in premiums while providing the same attractiveness for investment, because they expose investors to less market risk. These risk implications should be considered when designing policy schemes.
    Original languageEnglish
    Pages (from-to)495-505
    Publication statusPublished - 2014


    • Mean-variance analysis
    • Offshore wind
    • Energy policy
    • Feed-in tariffs

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