Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103292
Authors: 
Sunderkötter, Malte
Ziegler, Daniel
Year of Publication: 
2013
Series/Report no.: 
EWL Working Paper 03/13
Abstract: 
Investments in power generation assets are risky due to high construction costs and long asset lifetimes. Technology diversification in generation portfolios represents one option to reduce long-term investment risks for risk-averse decision makers. In this article, we analyze the impact of market imperfections induced by risk-aversion on the long-term investment portfolio structure in the market. We show that risk-averse electricity market agents who receive a managerial profit share may shift the technology structure in the market significantly away from the welfare optimum. A numerical example provides estimates on the potential scale of this effect and discusses sensitivities of key parameters.
Subjects: 
Nodal Pricing
Market Design
Electricity Markets
JEL: 
G11
L94
Q43
C45
Document Type: 
Working Paper

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