Dream team or strange bedfellows? Complementarities and differences between electric utilities and institutional investors in Swiss hydropower
Journal
Energy Policy
ISSN
0301-4215
Type
working paper
Date Issued
2018
Author(s)
Abstract (De)
Institutional investors can potentially be a significant source of capital for financing the energy transition. This is even more important as incumbent energy companies in many European countries struggle to adjust their business model to changing market conditions. This article reports on a choice experiment with pension fund and energy managers conducting 1,129 experimental investment choices in Swiss hydropower. We find that complementarities exist with regard to financing different stages of project development – pension funds are averse to construction and development risk but comfortable in deploying capital to existing projects, while incumbents are willing to invest in all project stages. The two groups show surprising similarities in their aversion to fluctuating electricity prices. When fully exposed to revenue risk, energy firms and pension funds demand a risk premium of 5.98% and 7.94% respectively. For policy makers, this suggests that shielding investors from revenue risk, as has been done with feed-in tariffs for other renewables, might be an effective way of lowering the financing cost of hydropower. When it comes to their preferred co-investors, the two groups express mutual distaste for each other: energy firms would rather invest in consortia with other incumbents, and the same goes for institutional investors.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SoM - Business Innovation
Publisher
Elsevier
Publisher place
Amsterdam
Volume
121
Pages
476
Official URL
Eprints ID
249995
File(s)![Thumbnail Image]()
Name
Salm and Wüstenhagen (2016).pdf
Size
1.33 MB
Format
Adobe PDF
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