Feed-in tariffs with minimum price guarantees and regulatory uncertainty

• Type: Article in International Scientific Journal
• Date: 2018

Authors

Barbosa, L (Author) Other; Ferrao, P (Author) Other; Rodrigues, Artur (Author) FEP; Sardinha, A (Author) Other

Journal

Title: Energy Economics

Vol. 72

Pages: 517-541

ISSN: 0140-9883

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 26 Citations

Scopus - 29 Citations

Other information

Authenticus ID: P-00P-HJ0

DOI: 10.1016/j.eneco.2018.04.028

Abstract (EN): 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.

Language: English

Type (Professor's evaluation): Scientific

Notes: O professor publicou com afiliação à U.Minho

No. of pages: 25