Support mechanisms and risk: Implications on the Nordic electricity system

Lena Kitzing, Hans Ravn

    Research output: Chapter in Book/Report/Conference proceedingArticle in proceedingsResearchpeer-review

    Abstract

    Investments in renewable energy projects, such as offshore wind parks, are very much dependent on financial support. The type of policy instrument chosen for such support determines investors' exposure to market risk, and thus influences which rate of return they expect to achieve. We make a stochastic analysis for the Nordic electricity system by conducting simulations with the energy system model Balmorel and by applying the mean-standard deviation approach of modern portfolio theory to quantify risk implications of policy instruments for an exemplary offshore wind park. The analysis reveals that the two support policy schemes Feed-in Tariffs and Feed-in Premiums provide different risk-return relationships. In the investigated case, a Feed-in Premium scheme would require a 13% higher support level, because of a 6% higher exposure of investors to market risk. Our findings can help when designing policy support, both regarding type of policy chosen and level of support.
    Original languageEnglish
    Title of host publication10th International Conference on the European Energy Market (EEM), 2013
    Number of pages7
    PublisherIEEE
    Publication date2013
    ISBN (Print)9781479920082
    DOIs
    Publication statusPublished - 2013
    Event10th International Conference on the European Energy Market - Stockholm, Sweden
    Duration: 27 May 201331 May 2013
    Conference number: 10

    Conference

    Conference10th International Conference on the European Energy Market
    Number10
    CountrySweden
    CityStockholm
    Period27/05/201331/05/2013

    Keywords

    • Power, Energy and Industry Applications

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