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

2013; Elsevier BV; Volume: 64; Linguagem: Inglês

10.1016/j.energy.2013.10.008

1873-6785

Lena Kitzing,

Capital Investment and Risk Analysis

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 feed-in 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.