Investment Decisions in the Renewable Energy Sector: An Analysis of Non-Financial Drivers

Technological Forecasting and Social Change, 80(3) 2013, 510- 524

HEC Paris Research Paper No. 976/2013

39 Pages Posted: 13 Apr 2013

See all articles by Andrea Masini

Andrea Masini

HEC Paris - Operations Management and Information Technology

Emanuela Menichetti

Observatoire Méditerranéen de l'Energie

Date Written: June 21, 2012

Abstract

Notwithstanding their many environmental, economic and social advantages, renewable energy technologies (RE) account for a small fraction of the world’s primary energy supply. One possible cause for this limited diffusion is that private investments in the RE sector, although potentially appealing, remain insufficient. The lack of adequate financing is also a clear indication that our understanding of the process by which investors fund RE ventures is still incomplete. This paper aims to fill in this gap and to shed new light on RE investment decisions. Building upon behavioral finance and institutional theory, we posit that, in addition to a rational evaluation of the economics of the investment opportunities, various nonfinancial factors affect the decision to invest in renewables. We analyze the investment decisions of a large sample of investors, with the objective to identify the main determinants of their choices. Our results shed new light on the role of institutional and behavioral factors in determining the share of renewable energy technologies in energy portfolios, and have important implications for both investors and policy makers: they suggest that RE technologies still suffer from a series of biased perceptions and preconceptions that favor status quo energy production models over innovative alternatives

Keywords: Renewable Energies, behavioral finance, empirical analysis, portfolio, investments diversification, survey research

Suggested Citation

Masini, Andrea and Menichetti, Emanuela, Investment Decisions in the Renewable Energy Sector: An Analysis of Non-Financial Drivers (June 21, 2012). Technological Forecasting and Social Change, 80(3) 2013, 510- 524, HEC Paris Research Paper No. 976/2013, Available at SSRN: https://ssrn.com/abstract=2247461 or http://dx.doi.org/10.2139/ssrn.2247461

Andrea Masini (Contact Author)

HEC Paris - Operations Management and Information Technology ( email )

1, rue de la Liberation
Jouy en Josas, 78351
France

Emanuela Menichetti

Observatoire Méditerranéen de l'Energie ( email )

France

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