The Effect of Environmental Policies on Risk Reductions in Energy Generation
71 Pages Posted: 27 Feb 2019 Last revised: 15 Oct 2020
Date Written: October 10, 2020
We demonstrate that environmental policies can decrease the risks in energy generation for private investors when several renewable technologies are simultaneously triggered. This is because diverse renewable technologies can hedge the intermittent generation of other forms of renewable power. Our study is distinct from previous literature, which has not examined environmental policies through a risk-reduction analysis, or has only considered a few technologies—such as wind and solar—when analyzing risk-reduction benefits. This paper is important, as environmental policies can be justified not only due to environmental benefits, but also economically from a risk-reduction perspective by using basic diversification gains.
Keywords: Environmental Policy; Risk Reduction; Energy Generation; Optimal Expansion Planning; Renewable Generation.
JEL Classification: Q28, Q42, Q48
Suggested Citation: Suggested Citation