Please use this identifier to cite or link to this item:
Title: Feed-in Tariff Contract Schemes and Regulatory Uncertainty
Authors: Barbosa, Luciana
Nunes, Cláudia
Rodrigues, Artur
Sardinha, Alberto
Keywords: Investment Analysis
Real Options
Regulatory Uncertainty
Issue Date: 2020
Publisher: CICEE. Universidade Autónoma de Lisboa
Abstract: This paper presents a novel analysis of two feed-in tariffs (FIT) under market and regulatory uncertainty, namely a sliding premium with cap and floor and a minimum price guarantee. Regulatory uncertainty is modeled with a Poisson process, whereby a jump event may reduce the tariff before the signature of the contract. Using a semi-analytical real options framework, we derive the project value, the optimal investment threshold, and the value of the investment opportunity for these schemes. Taking into consideration the optimal investment threshold, we also compare the two aforementioned FITs with the fixed -price FIT and the fixed-premium FIT, which are policy schemes that have been extensively studied in the literature. Our results show that increasing the likelihood of a jump event lowers the investment threshold for all the schemes; moreover, the investment threshold als o decreases when the tariff reduction increases. We also compare the four schemes in terms of the corresponding optimal investment thresholds. For example, we find that the investment threshold of the sliding premium is lower than the minimum price guarantee. This result suggests that the first regime is a better policy than the latter because it accelerates the investment while avoiding excessive earnings to producers.
Peer Reviewed: no
Appears in Collections:WPs_2020

Files in This Item:
File Description SizeFormat 
WORKIN PAPER 01-2020.pdf1,45 MBAdobe PDFThumbnail

FacebookTwitterDeliciousLinkedInDiggGoogle BookmarksMySpaceOrkut
Formato BibTex mendeley Endnote Logotipo do DeGóis Logotipo do Orcid 

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.