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The Insurance Effect of Renewable Distributed Energy Resources Against Uncertain Electricity Price Developments

Title data

Fridgen, Gilbert ; Halbrügge, Stephanie ; Olenberger, Christian ; Weibelzahl, Martin:
The Insurance Effect of Renewable Distributed Energy Resources Against Uncertain Electricity Price Developments.
In: Energy Economics. Vol. 91 (September 2020) . - No. 104887.
ISSN 0140-9883
DOI: https://doi.org/10.1016/j.eneco.2020.104887

Official URL: Volltext

Project information

Project title:
Project's official titleProject's id
Projektgruppe WI Energie und kritische InfrastrukturenNo information

Project financing: Andere

Abstract in another language

To combat climate change, many countrie sall around the world currently foster the development of renewable energy sources (RES). However, in contrast to traditional energy systems that relied on few central power plants, RES are typically highly decentral and spread all over a country. Against this backdrop, the promotion of a decentralization of the energy systemby fostering a regional balance of energy demand and supply with a corresponding increase in energy democracy is seen as a promising approach. However, energy democracy driven by an increasing involvement of consumers requires adequate investments of consumers in their own local RES in order to become active players, usually called prosumers. Risk associated with uncertain long-term electricity price
developments is generally seen as a barrier to investments. In contrast, we describe that an investment in distributed energy resources (DERs) may actually serve as a consumer's insurance against price risk. Our results set out that the consideration of risk-aversion may actually positively shift an investment decision in renewable DERs. This is due to the prosumer becoming more self-sufficient and less dependent on uncertain price developments. To analyze such an insurance effect, we create a formal decision model considering the prosumer's risk-aversion and derive the prosumer's optimal investment in renewable DERs. However, our results also indicate that under some circumstances the insurance effect disappears: When a prosumer turns into a predominant producer, the prosumer is again exposed to risk in terms of uncertain revenues. Ultimately, our work highlights the importance of a consideration of the insurance effect when assessing an investment in renewable DERs.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Renewable energy sources; Distributed energy resources; Insurance effect; Investment decision
Institutions of the University: Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Profile Fields
Profile Fields > Emerging Fields
Profile Fields > Emerging Fields > Energy Research and Energy Technology
Research Institutions
Research Institutions > Research Centres
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Research Institutions > Affiliated Institutes
Research Institutions > Affiliated Institutes > Fraunhofer Project Group Business and Information Systems Engineering
Research Institutions > Affiliated Institutes > FIM Research Center Finance & Information Management
Result of work at the UBT: Yes
DDC Subjects: 000 Computer Science, information, general works > 004 Computer science
300 Social sciences > 330 Economics
Date Deposited: 19 Nov 2020 10:10
Last Modified: 14 Dec 2020 08:05
URI: https://eref.uni-bayreuth.de/id/eprint/60003