Decision support system for exploiting local renewable energy sources: A case study of the Chigu area of southwestern Taiwan

The topic of climate and energy policy has drawn new attention since the Kyoto Protocol has now come into force. It is hoped that strengthened use of renewable energy sources can meet new international environmental requirements and provide self-sufficient domestic energy supplies. The decision support system established in this study integrates potential evaluations, cost analyses, legal incentives, and analysis of returns on investments with the aid of a geographic information system (GIS). This system can provide insights for policymakers into where and the extent of the potentials, for lawmakers into whether the current legal incentives are sufficient to encourage private investment, and for investors into whether investments in exploiting local renewable energy sources are economically feasible. Under the current incentive framework in Taiwan, the amortization periods of investment on renewable energy are generally longer than the period over which the investment is to be recovered. This presents an unfavorable condition for attracting investments to and for developing renewable energy. An increase in remuneration through legal revisions is needed before domestic investment in renewable energy will actively expand.     

Top down strategy for renewable energy investment: Conceptual framework and implementation

Electricity market is undergoing a tremendous transformation throughout the world. A drastic reduction of carbon emission cannot be realized if renewable energy resources are not increased in share of generation mix. Currently, most of the traditional mechanisms, including regulatory policies, fiscal incentives and public financing, are initiated from and heavily relied on policymakers and governments. However, not only these schemes do not necessarily align with business interests of investors, but also the motivations for renewable energy developments are always initiated by governments. In order to realize the full potential of renewable energy investment, an innovative approach is necessary to motivate investors and lessen government expenditures.In this paper, we present a top down strategy for renewable energy investment. The proposed approach is a three-step framework. By applying the approach, renewable energy global market leaders and trends will be identified and analyzed that included: (1) economics and renewable energy policy, (2) specific renewable energy sectors that presents the most attractive investment opportunity, (3) and finally the most promising renewable energy investment vehicles for investors. Other stakeholders can also use the developed framework, such as consumers and policymakers, to make socio-economic decisions and assess renewable energy investments.     

Who invests in renewable electricity production? Empirical evidence and suggestions for further research

Transforming energy systems to fulfill the needs of a low-carbon economy requires large investments in renewable electricity production (RES-E). Recent literature underlines the need to take a closer look at the composition of the RES-E investor group in order to understand the motives and investment processes of different types of investors. However, existing energy policies generally consider RES-E investments made on a regional or national level, and target investors who evaluate their RES-E investments according to least-cost high-profit criteria. We present empirical evidence to show that RES-E investments are made by a heterogeneous group of investors, that a variety of investors exist and that their formation varies among the different types of renewable sources. This has direct implications for our understanding of the investment process in RES-E and for the study of motives and driving forces of RES-E investors. We introduce a multi-dimensional framework for analyzing differences between categories of investors, which not only considers to the standard economic dimension which is predominant in the contemporary energy literature, but also considers the entrepreneurship, innovation-adoption and institutional dimensions. The framework emphasizes the influence of four main investor-related factors on the investment process which should be studied in future research: motives, background, resources and personal characteristics.     

What are retail investors' risk-return preferences towards renewable energy projects? A choice experiment in Germany

Citizens own nearly half the renewable energy generation capacity in Germany and have been important drivers of the country's energy transition. In contrast to citizens' important role in financing renewable energies, the energy policy and economics literature has traditionally focused on other investors, such as incumbent energy firms. To close this gap, this paper reports on a large-scale survey of 1,990 German retail investors. Conducting a choice experiment with the subset of 1,041 respondents who expressed an interest in investing in community renewable energy projects, we present a unique dataset allowing for new insights in risk-return expectations of retail investors. We find that apart from return on investment, respondents are particularly sensitive to the minimum holding period and the issuer of community renewable energy investment offerings. A minimum holding period of 10 years implies a risk premium of 2.76% points. A subsequent segmentation analysis shows that two groups of potential community renewable energy investors with different risk-return expectations can be identified: “local patriots” and “yield investors”. In contrast to professional investors, a majority of retail investors use simple decision rules such as calculating payback time or relying on their gut feeling when making investments.     

Multidimensional evaluation of global investments on the renewable energy with the integrated fuzzy decision‐making model under the hesitancy

This study aims to assess global investment alternatives with respect to renewable energy. Within this framework, five different renewable energy types (biomass, hydropower, geothermal, wind, and solar) are determined as investment alternatives. Moreover, eight different criteria are selected by considering the four different dimensions of balanced scorecard. Additionally, the fuzzy‐based decision making trial and the evaluation laboratory under the hesitancy (HF‐DEMATEL) model are taken into the account to weight these dimensions and criteria and the technique for order the preferences by the similarity to the ideal solution with the fuzzy hesitant methodology (HF‐TOPSIS) is considered to select the alternatives of renewable energy investments. The novelties of this study are to propose an integrated model and provide the balanced scorecard–based evaluations of global renewable energy investment alternatives. The findings show that learning and growth and customer are the most important dimensions for the investment on renewable energy. It is also identified that market potential, product customization, and technological development are the most significant criteria for this situation. On the other side, solar and wind energy are the most important renewable investment alternatives. These results explain that technological improvement should be maintained, and customer expectations should be met by the companies. Furthermore, solar power plant and wind power plant should be developed in the countries. For this purpose, governments should give necessary incentives to the investors, such as allocating appropriate lands. These actions can attract the attentions of the potential investors for these renewable energy alternatives. Owing to this issue, it can be possible to increase the capacity of electricity productions in the countries with a potential minimum cost.     

Renewable energy investment opportunities in Mauritius—an investor’s perspective

The main purpose of the paper is to explore the renewable energy investment opportunities in Mauritius. Magnum Power, an engineering firm in India promoting renewable energy technologies, conducted a feasibility study to identify the possibilities of investments on various renewable energy projects in Mauritius. The study analysed the Mauritius energy scenario, the earlier and recent renewable energy projects, the current status of such projects, the barriers for renewable energy developments, and the suitable renewable energy technology for fruitful investment. Based on the study outcome, an investment proposal for a 10 MW wind farm project is presented, which would be a useful guideline for investors looking for investment opportunities in Mauritius.     

Green accounting for greener energy

The first step towards the widespread use of renewable energy sources and preservation of our environment for the people of the future is to adopt the “green accounting” standards that translate socially and environmentally responsible behavior into monetary terms, the only language businesses understand. These standards have the potential of switching on the red light for all pollution-causing power plants, and those depleting the natural capital in any way, be it over-harvesting the forests, or exhausting the underground treasures – coal, oil, natural gas, etc. This paper will show how green accounting can help in changing the focus from the economic welfare to the total societal welfare, acknowledging the fact that human society is an integral part of the natural world. The paper will also briefly present the software developed by the authors that introduce the green accounting principles into the investment appraisal process, aiming at encouraging investments into renewable energy. The tool is also useful as a platform facilitating calibration of economic/financial instruments, like environmental taxes of governmental incentives, that are usually to boost renewable energy sector. The comparative analysis of investment into biofuel-powered combined heat and power production plant using two types of investment valuation standards, one based on conventional cash-flow analysis, the other based on green-accounting standards is detailed in the paper. The analysis is performed as a part of the European Commission Framework Program Project AFTUR, undertaken by the consortium consisting of respectful European Research Establishments in renewable energy area as well as major European biofuel-powered turbine producers. The results show that the wider adoption of green accounting standards would induce the unprecedented growth of the renewable energy sector, because it would make the investment into renewable energy attractive for investors.     

Using the binomial model for the valuation of real options in computing optimal subsidies for Chinese renewable energy investments

For the valuation and implementation of renewable energy investments, the issue of providing private investors with a financial incentive to accelerate their investment is frequently a critical component. We apply this principle to the Chinese context. This paper focuses on using the binomial model to compute the required subsidy that would incentivize investors to optimal immediate exercise of the American-style option embedded at the launching phase of the projects for Chinese renewable energy investments. In addition, this paper also aims at contrasting the binomial model with the more-laborious Monte Carlo simulation previously used to evaluate the proper subsidy. By using the same data but a different method, and reducing the number of uncertain factors to one, it is suggested these two methods have similar outcomes but the binomial method requires substantially less computation and is more self-explanatory. This paper thus provides government with an easy-to-implement alternative way to compute the required subsidy.     

The impact of wind power support schemes on technology choices

In energy systems with large shares of variable renewable energies, electricity generation is lower during unfavorable weather conditions. System-friendly wind turbines (SFTs) rectify this by producing a larger share of their electricity at low wind speeds. This paper analyzes to what extent SFTs' benefits out-weigh their additional costs and how to incentivize investments into them. Using a wind power investment model for Germany, I show that SFTs indeed deliver benefits for the energy system that over-compensate for their cost premium. Floating market premium schemes incentivize their deployment only where investors bear significant price risks and possess sufficient foresight. Alternatively, a new production value-based benchmark triggers investors to install SFTs that meet the requirements of power systems with increasing shares of variable renewable energies.     

Exuberance in China's renewable energy investment: Rationality,capital structure and implications with firm level evidence

The new century has witnessed phenomenal worldwide growth in renewable energy investments. China has been especially remarkable, surpassing both the US and the EU in 2013. Some recent facts, however, have raised the question of whether exuberant investment in China’s renewable energy sector is rational. This paper aims to contribute to the literature and to the debate in two ways. First, it tests the over-investment hypothesis based on the main stream finance methodology; second, it analyzes the role of capital structure in the performance of China's renewable energy firms. Empirical results show that overinvestment in the renewable energy sector exists. The problem is more significant in the biomass and wind sector. Capital structure is found to be more important to downstream firms, indicating that policy makers may provide support that enables these firms to finance their investments through corporate bonds, commercial credit, or long-terms debts.     

Impact of public policy uncertainty on renewable energy investment: Wind power and the production tax credit

It is generally understood that the pattern of repeated expiration and short-term renewal of the federal production tax credit (PTC) causes a boom–bust cycle in wind power plant investment in the US. This on–off pattern is detrimental to the wind industry, since ramp-up and ramp-down costs are high, and players are deterred from making long-term investments. It is often assumed that the severe downturn in investment during “off” years implies that wind power is unviable without the PTC. This assumption turns out to be unsubstantiated: this paper demonstrates that it is not the absence of the PTC that causes the investment downturn during “off” years, but rather the uncertainty over its return. Specifically, it is the dynamic of power purchase agreement (PPA) negotiations in the face of PTC renewal uncertainty that drives investment volatility. With contract negotiations prevalent in the renewable energy industry, this finding suggests that reducing uncertainty is a crucial component of effective renewable energy policy. The PTC as currently structured is not the only means, existing or potential, for encouraging wind power investment. Using data from a survey of energy professionals, various policy instruments are compared in terms of their perceived stability for supporting long-term investment.     

China's Sovereign Wealth Fund Investments in overseas energy: The energy security perspective

Sovereign Wealth Funds (SWFs) are state-owned investment funds that invest in real and financial assets. Since the global financial crisis in 2008, SWFs' investments have resulted in national security concerns of host countries because SWFs continue to expand rapidly and have become increasingly active in real-time strategic transactions. Given this background, China, which has the biggest SWF in the world, is facing severe challenges of energy resources shortages while its plan is to accomplish social and economic development goals. Energy security is a key driving force of the energy investment policy of China's SWFs. This makes the SWF investments more complicated and more politically sensitive. The combination of sovereign rights and the strategic importance of energy also makes geopolitics more complicated and brings more uncertainty to SWF investments. This article explores the relationship between energy security and energy investments of China's SWFs. It is recognised that the energy investment of SWFs must follow a sustainable path to coordinate energy security, economic growth, return on investment and national security concerns. Government policymakers are urged to balance the financial and political returns on SWFs against potential negative effects. The conclusion presents insights for policymakers, energy scholars and SWF researchers.     

Utility-scale energy storage in an imperfectly competitive power sector

Interest in sustainability has increased the share of variable renewable energy sources (VRES) in power generation. Energy storage systems' potential to mitigate intermittencies from non-dispatchable VRES has enhanced their appeal. However, the impacts of storage vary based on the owner and market conditions. We examine the policy implications of investments in utility-scale battery storage via a bi-level optimization model. The lower level depicts power system operations, modeled as either perfect competition or Cournot oligopoly to allow for the assessment of producer market power. The upper-level investor is either a welfare-maximizer or a profit-maximizing standalone merchant to reflect either welfare enhancement or arbitrage, respectively. We implement a realistic case study for Western Europe based on all possible size-location storage investment combinations. We find that market competition affects investment sizes, locations, and their profitability more than the investor's objectives. A welfare-maximizer under perfect competition invests the most in storage capacity. Consumers typically gain most from storage investments in all cases, exceeding the gains for the investors. Specifically, our results show that storage investments may either not occur or be located differently than at social optimum, if market power is exerted. Thus, policy makers need to anticipate producer market power when setting regulation.     

Private sector investment in renewable energy utilisation: strategic analysis of stakeholder perspectives in developing countries

Private sector encouragement in the development programmes of renewable energy (RE) utilisation is one of the important subjects and challenges for governments of developing countries. While profit in short-term and market-based orientation are the dominant approach of private sector to start an investment, governments and policymakers are paying special attention to participation of private investments to achieve their long-term development plans. In contrast, academic researchers notice to private investments in a structure that is sometimes in conflict with private investors and policymakers perspectives. Therefore, each group of stakeholders has its own priorities that negatively affect promotion and adoption plans of renewable alternatives utilisation. This article reviews and analyses different perspectives of RE stakeholders (beneficiaries) to encourage participation of private investments Differences in priorities, concerns, and interests in each group of stakeholders are the subjects that are discussed in the article. To close the attitudes and perspectives, a recommendations package is also presented in two levels of operational and strategic     

Exploiting the oil–GDP effect to support renewables deployment

The empirical evidence from a growing body of academic literature clearly suggests that oil price increases and volatility dampen macroeconomic growth by raising inflation and unemployment and by depressing the value of financial and other assets. Surprisingly, this issue seems to have received little attention from energy policy makers.In percentage terms, the oil–GDP effect is relatively small, producing losses in the order of 0.5% of GDP for a 10% oil price increase. In absolute terms however, even a 10% oil price rise—oil has risen at least 50% in the last year alone—produces GDP losses that, could they have been averted, would significantly offset the cost of increased RE deployment. This paper draws on the empirical oil–GDP literature, which we summarize, to show that (i) by displacing gas and oil, renewable energy investments can help nations avoid costly macroeconomic losses produced by the oil–GDP effect and, (ii) that these avoided losses represent a significant external macroeconomic benefit of such investments.We show that a 10% increase in RE share avoids GDP losses in the range of $29–$53 billion in the US and the EU ($49–$90 billion for OECD). These avoided losses offset one-fifth of the RE investment needs projected by the EREC and half the OECD investment projected by a G-8 Task Force. For the US, the figures further suggest that each additional kW of renewables, on average, avoids $250–$450 in GDP losses, a figure that varies across technologies as a function of annual capacity factors. We approximate that the offset is worth $200/kW for wind and solar and $800/kW for geothermal and biomass. While we focus only on renewables, the GDP offset will apply in some measure to other non-fossil technologies including energy efficiency, DSM and nuclear. The societal valuation of non-fossil alternatives must reflect these avoided GDP losses, whose benefit is not fully captured by private investors. This said, we fully recognize that wealth created in this manner does not directly form a pool of public funds that is easily earmarked for renewables support.Finally, the oil–GDP relationship has important implications for correctly estimating direct electricity generating cost for conventional and renewable alternatives and for developing more useful energy security and diversity concepts. We also address these issues.     

Valuing the attributes of renewable energy investments

Increasing the proportion of power derived from renewable energy sources is becoming an increasingly important part of many countries's strategies to achieve reductions in greenhouse gas emissions. However, renewable energy investments can often have external costs and benefits, which need to be taken into account if socially optimal investments are to be made. This paper attempts to estimate the magnitude of these external costs and benefits for the case of renewable technologies in Scotland, a country which has set particularly ambitious targets for expanding renewable energy. The external effects we consider are those on landscape quality, wildlife and air quality. We also consider the welfare implications of different investment strategies for employment and electricity prices. The methodology used to do this is the choice experiment technique. Renewable technologies considered include hydro, on-shore and off-shore wind power and biomass. Welfare changes for different combinations of impacts associated with different investment strategies are estimated. We also test for differences in preferences towards these impacts between urban and rural communities, and between high- and low-income households.     

Energy conservation investments: A comparison between China and the US

Growth in energy consumption in China has soared from 2001 to 2004, driven largely by a booming economy and heavy investment in infrastructure and housing. In response, China has poured billions of dollars of investment in building power plants—at a rate of one large power plant (1000 MW) per week. In fact, China in 2004 has added the entire generating capacity of California or Spain in a single year. In contrast, investment in energy conservation projects has weakened considerably in recent years. This paper examines trends in energy efficiency investments in China and the US. The comparison highlights the potential of energy conservation investments in addressing China's current energy crisis as well as the inadequacy of such investments in China. Finally, the paper outlines a few scenarios for appropriate levels of investments in energy efficiency in China in the future.     

Energy consumption and economic growth in Turkey during the past two decades

The Turkish economy has undergone a transformation from agricultural to industrial, enhanced by rapid urbanization, especially after 1982. Turkey's gross national production has grown at an average annual rate of 5% since 1983, ranking it at the top of the OECD countries, although the growth pattern has been uneven. Economic growth in recent years has been associated with the privatization of public enterprises. Turkey's energy demand has risen rapidly as a result of social and economic development. The country's energy consumption has grown considerably since the beginning of the 1980s. The Turkish government encourages foreign and Turkish private sector investors to implement the energy projects and is currently working on a new investment model for the construction of new generation plants to create the additional capacity needed. The Turkish energy sector, with its current size of 30 billion US dollars and projected size of 55 billion US dollars by 2015, as well as the fundamental restructuring process it has been going through since 2001, attracts both local and foreign investors. The sector needs an investment amount of approximately 130 billion US dollars by 2020. The aim of the present paper is to investigate the increasing of Turkish energy demand with the growth of the economy and utilization of domestic energy sources and the case of investments and imports in Turkey during the past two decades.     

Renewable and sustainable energy use in Turkey: a review

Turkey is an energy importing nation with more than half of our energy requirements met by imported fuels. Air pollution is becoming a significant environmental concern in the country. In this regard, renewable energy resources are becoming attractive for sustainable energy development and environmental pollution mitigation in Turkey. Turkey's geographical location has several advantages for extensive use of most of these renewable energy sources. Because of this and our limited fossil fuel resources, a gradual shift from fossil fuels to renewables seems to be a serious alternative for Turkey's energy future. This article presents a review of the present energy situation and assesses sustainability, technical, and economical potential of renewable energy sources, and future policies for the energy sector in Turkey. Throughout the paper, problems relating to renewable energy sources, environment, and sustainable development are discussed for both current and future energy investments. The renewable energy potential of the country and its present status are evaluated.     

The economics of energy conservation policies: A study of US primary copper production

US oil and gas price regulation has made energy-saving investments less attractive than they otherwise might have been. The question thus arises: at what energy prices will conservation be attractive? This microeconomic study aims at answering this question for US primary copper firms. The costs and benefits of three major potential energy conserving processes are estimated. A profit-maximizing computer model is then used to simulate the behaviour of three leading US copper producers and their rates of adoption of the conservation measures. The costs associated with energy savings are calculated and the energy price changes necessary for the adoption of the measures are considered. It is concluded that, assuming 1974 prices for non-energy factors, energy prices need to be 110% greater than 1974 levels before energy-saving investment becomes attractive.