Quotation Gugler, Klaus, Haxhimusa, Adhurim, Liebensteiner, Mario, Schindler, Nora. 2019. Investment Opportunities, Uncertainty, and Renewables in European Electricity Markets. Energy Economics. 85 104575


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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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Energy Economics
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-B, WH-B
Language English
Title Investment Opportunities, Uncertainty, and Renewables in European Electricity Markets
Volume 85
Year 2019
Page from 104575
Reviewed? Y
URL http://www.sciencedirect.com/science/article/pii/S0140988319303706
DOI https://doi.org/10.1016/j.eneco.2019.104575
Open Access N
JEL L25, L22, L51, Q48

Associations

People
Gugler, Klaus (Details)
Haxhimusa, Adhurim (Former researcher)
Liebensteiner, Mario (Former researcher)
Schindler, Nora (Details)
Organization
Research Institute for Regulatory Economics FI (Details)
Institute for Quantitative Economics IN (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5370 Industrial economics (Details)
5372 Regulatory economics (Details)
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