Investment decisions and uncertainty in the power generation sector

• The purpose of this paper has been to analyse how increased market uncertainties affects the timing and technological choice of investment projects in the power sector with focus on the Swedish situation using two different investment behavioural assumptions. The investment model assumes stochastic input prices (fuel prices), output price (electricity) and emission permit price. In addition, the green certificate scheme presently used in Sweden is deterministically incorporated in the model. The technology choices included are offshore wind power, gas-fired power and biomass power. The results suggests that biopower is the most likely technology choice under both investment behavioural assumptions and regardless if investment timing, driven by the policies. The likelihood of choosing gas power increases over time and likelihood of choosing wind power decreases over time, driven by the relative capital requirements per unit of output for the two technologies. Wind power would benefit is a lower discount rate is used.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Economics

Nationalekonomi

Publication and Content Type

ref (subject category)

kon (subject category)