Investment risks under uncertain climate change policy

Blyth, William; Bradley, Richard A.; Bunn, Derek W.; Clarke, Charlie; Wilson, Thomas S.; Yang, Ming

doi:10.1016/j.enpol.2007.05.030

Cited by 222 publications

(80 citation statements)

References 15 publications

(14 reference statements)

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“…Additionally, they find that greater uncertainty increases the incentive to choose power plant types with lower capital to generating capacity ratios. Blyth et al (2007) and Kettunen et al (2011) analyse how a firm's investment propensity is affected by uncertainty in carbon prices. The former find that carbon price uncertainty creates a risk premium for power generation and that the option to retrofit CCS may accelerate investment in a coal power plant, while the latter use a multistage stochastic optimization model and demonstrate how real options valuation yields substantially different results regarding investment propensities compared to conventional economic analysis.…”

Section: Related Workmentioning

confidence: 99%

Stepwise Green Investment under Policy Uncertainty

Chronopoulos¹,

Hagspiel²,

Fleten³

2016

The Energy Journal

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We analyse how market price and policy uncertainty, in the form of random provision or retraction of a subsidy, interact to affect the optimal time of investment and the size of a renewable energy (RE) project that can be completed in either a single (lumpy investment) or multiple stages (stepwise investment). The subsidy takes the form of a fixed premium on top of the electricity price, and, therefore, investment is subject to electricity price uncertainty. We show that the risk of a permanent retraction (provision) of a subsidy increases (decreases) the incentive to invest, yet lowers (raises) the amount of installed capacity, and that this result is more pronounced as the size of the subsidy increases. Additionally, we show that increasing the number of policy interventions lowers the expected value of a subsidy and the size of the project. Furthermore, we illustrate that, although an increase in the size of a subsidy lowers the relative value of the stepwise investment strategy, the expected value of a lumpy investment strategy is still lower than that of stepwise investment.

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Section: Related Workmentioning

confidence: 99%

Stepwise Green Investment under Policy Uncertainty

Chronopoulos¹,

Hagspiel²,

Fleten³

2016

The Energy Journal

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“…In a longer-term, return on investments are highly uncertain as the future of international emissions trading is presently unknown and the possibilities for predictable carbon prices hence impossible when CCS is predicted to become commercial (around 2020, see Figure 1). Thirdly, cost-risks are elevated as that the carbon emission price has a risk premium due to the uncertainties on the carbon markets (Blyth et al 2007), and that the potential for storage capacity scarcity establishes a shadow price in investment and operational calculus (Narita 2009). This means that even though the carbon price would eventually match the costs of CCS operations, theoretically making CCS a financially viable abatement option, the price would need to be significantly higher to work as an effective incentive for investments.…”

Section: Bridging the Cost Gapmentioning

confidence: 99%

Obstacles for CCS deployment: an analysis of discrepancies of perceptions

Stigson

Hansson

Lind³

2012

Mitig Adapt Strateg Glob Change

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The potential for CO 2 emission reductions through carbon capture and storage (CCS) is depending on investments that can bring the technology from the current R&D through to commercial applications. The intermediate step in this development is demonstration plants that can prove the technical, economic, social, and ecological feasibility of CCS technologies. Based on a CCS stakeholder questionnaire survey and a literature review, we critically analyse discrepancies regarding perceptions of deployment obstacles and experiences from early demonstration plants. The analysis identifies discrepancies between CCS policies versus important deployment considerations and CCS stakeholder policy demands. The discrepancy gap is emphasised by lessons from restructured, postponed, and cancelled CCS projects. To bridge this cognitive gap towards proving CCS through demonstration activities, the article highlights policy implications of establishing a broad understanding of deployment obstacles. Attention to these obstacles is important for policymakers and industry in channelling efforts to demonstrating CCS, hence validating the current focus on CCS as a key abatement potential. Under present conditions, the findings question the robustness of current CCS abatement potential estimates and deployment goals as established by policymakers and in scenarios.

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“…A menedzserek beruházások időzítésére vonatkozó flexibilitása ezen információk beszerzésének egy fontos módja, más szóval kifizetendő lehet várni addig, amíg a bizonytalanságot okozó körülmények megszűnnek, követ-kezésképpen az a vállalat, amely a beruházások időzítésé-nek képességét, az időzítési rugalmasságát már birtokolja azért, hogy feladja ezt a rugalmasságot jogosan vár el pénzügyi kompenzációt az azonnali megvalósítás eseté-ben, az új információkra való várakozás helyett (Blyth et al, 2007).…”

Section: A Reálopciók Felismerése Azonosításaunclassified

A reálopciók első 40 éve

Csapi¹

2018

Veztud

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Investment risks under uncertain climate change policy

Cited by 222 publications

References 15 publications

Stepwise Green Investment under Policy Uncertainty

Stepwise Green Investment under Policy Uncertainty

Obstacles for CCS deployment: an analysis of discrepancies of perceptions

A reálopciók első 40 éve

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