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Green Certificate Price Uncertainty and Renewable Energy Investment : Evidence from an Integration between Solar and Non-solar Renewable Energy Certificate ( Rec ) Markets in Korea
| Content Provider | Semantic Scholar |
|---|---|
| Author | Kim, Jeayoon |
| Copyright Year | 2019 |
| Abstract | A stable income flow from renewable energy certificate (REC) sales is crucial for ongoing business in renewable energy companies. This paper examines the relationship between REC price uncertainty and renewable energy investment. Using a REC market data in Korea, I find that a high level of uncertainty about REC prices discourages renewable energy investment. Given that the decision to invest in renewable projects is highly irreversible, it is optimal to postpone new renewable energy installations until REC price uncertainty is resolved. Solar photovoltaic (PV) is a prime example. Solar project developers significantly reduce new capacity investment in the periods with highly volatile REC prices, while they increase investment when the prices are expected to be stable. I further show that renewable energy firms require more debt and equity financing to proceed a project in the presence of severe uncertainty about REC revenues. This finding suggests that increased dependence on external financing contributes to deter investments in new capacity installations. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://www.iaee.org/en/publications/proceedingsabstractpdf.aspx?id=16120 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |