The Effect of Environmental Policies on Risk Reductions in Energy Generation

71 Pages Posted: 27 Feb 2019 Last revised: 15 Oct 2020

See all articles by Alejandro Bernales

Alejandro Bernales

Universidad de Chile

Andrés Flores

University of Chile

Andrés Inzunza

University of Chile

Rodrigo Moreno

Imperial College London

Giancarlo Acevedo

Central Bank of Chile

Date Written: October 10, 2020

Abstract

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

Bernales, Alejandro and Flores, Andrés and Inzunza, Andrés and Moreno, Rodrigo and Acevedo, Giancarlo, The Effect of Environmental Policies on Risk Reductions in Energy Generation (October 10, 2020). Available at SSRN: https://ssrn.com/abstract=3336294 or http://dx.doi.org/10.2139/ssrn.3336294

Alejandro Bernales (Contact Author)

Universidad de Chile ( email )

Diagonal Paraguay 257
Santiago
Chile

HOME PAGE: http://www.alejandrobernales.com

Andrés Flores

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Andrés Inzunza

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Rodrigo Moreno

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Giancarlo Acevedo

Central Bank of Chile ( email )

Agustinas 1180
Santiago, RM 8340454
Chile

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