The Impact of Renewable Electricity Support Design on Investment Returns

Abstract: The thesis at hand analyzes how support schemes (Feed-in-tariffs, Quota obligations and Auctions) provided to renewable electricity producers influence returns of renewable projects. The thesis is divided into two parts. First, private financial data is obtained from renewable electricity producer for 9 photovoltaic power plants from three countries. The data is used to compile DCF valuations models. Using the DCF, we compared valuations incorporating initial expectations of investors with valuations accounting for subsequent negative modifications to support schemes pursued by governments in Romania, Cyprus and Slovakia. Our findings show, that Feed-in-tariff support design provides insufficient downside protection, even though governments are likely to promise otherwise. In the second part of the thesis, observations from case studies are analyzed on more systematic level. In particular, the link between support design type and firm profitability is tested on historical accounting data of 169 companies. Our findings show that the influence of support design differs across renewable technologies.