Financing uncertainties in high renewable markets

In the context of risk assessment and management in energy markets, understanding the behavior of investors toward variable energy resources like wind and solar is crucial. In an ideal deterministic setting, high price spikes and spot prices could theoretically ensure the recovery of capital costs over time. However, the reality is complicated by investor risk aversion and the inherent uncertainties in the market. Unlike thermal generators, wind and solar resources do not encounter fuel price instability, which could make investing in natural gas plants less attractive compared to renewable options in a future dominated by high variability in renewable sources. Therefore, the comparative analysis of investment choices highlights that perceptions of risk and uncertainty can significantly impact financing decisions in the renewable energy sector.

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