Contributions of information systems research to decision support for wind market players

The mitigation of climate change through the transition toward sustainable and efficient energy systems based on renewable energy technologies is one of the greatest challenges of the 21st century pursued by an ever-growing number of individuals, organizations, and societies in large. The extensive financial support of many nations for renewable energies has led to a rapid global spread of these technologies in the last two decades. Nowadays, as renewable energy technologies are maturing, governments tend to implement more market-based support mechanisms in order to scale back financial support, which poses new challenges for all market players. Consequently, in a consolidating market environment, only those players can establish themselves in the market, who have the right information at the right time in order to make the best possible decisions on newly emerging issues. In this context, this thesis demonstrates the high potential of information systems (IS) research on decision support systems (DSS) in making solution-oriented and impactful contributions to affected renewable energy stakeholders by improving the decision-making process through aggregated information. Six consecutive thematic topics are presented and discussed based on several research articles, each addressing a specific challenge of different renewable energy stakeholders by means of quantitative design science research (DSR) on DSS. The thematic spectrum ranges from micro-level challenges of individual renewable energy operators to macro-level challenges of policy-makers. A strong focus is placed on renewable energy finance and policy topics in the field of the wind energy sector. Findings indicate that the role of appropriate and customized DSS is becoming increasingly important for all market players, due to the constantly growing diversity of information and amount of data available in the rapidly digitalizing renewable energy sector. They further point to the strength and necessity of IS research with regard to its integrative function between other research areas and how this property could be used in order to respond to the need for more practical support for decision-makers concerned with environmental and sustainability issues.Die Abschwächung des Klimawandels durch den Übergang zu nachhaltigen Energiesystemen auf Grundlage Erneuerbarer Energien (EE) ist eine der größten Herausforderungen des 21. Jahrhunderts. Die umfangreiche Förderung vieler Nationen für EE hat in den vergangenen zwei Jahrzehnten weltweit zu einer großen Verbreitung dieser Technologien geführt. Da EE seither immer wettbewerbsfähiger werden, neigen politische Entscheidungsträger vieler Nationen heutzutage dazu, zunehmend marktbasierte Fördermechanismen einzuführen, um die finanzielle Förderung dauerhaft zu reduzieren, wodurch neue Herausforderungen für Marktteilnehmer entstehen. In einem sich konsolidierenden Marktumfeld können sich nur diejenigen Akteure langfristig am Markt etablieren, die über die richtigen Informationen zur richtigen Zeit am richtigen Ort verfügen. In diesem Zusammenhang zeigt die vorliegende kumulative Dissertation das hohe Potenzial der IS Forschung im Bereich von Entscheidungsunterstützungssystemen (EUS) lösungsorientierte und wirkungsvolle Beiträge gegenüber EE-Marktteilnehmern zu leisten, indem sie deren Entscheidungsprozesse durch aggregierte Informationen verbessert. Sechs aufeinander folgende thematische Abschnitte werden auf Grundlage von Forschungsartikeln vorgestellt und diskutiert und befassen sich jeweils mit der Lösung einer spezifischen Herausforderung eines oder mehrerer Marktteilnehmer mittels quantitativer DSR Methoden. Das thematische Spektrum reicht von mikroskaligen Herausforderungen einzelner EE-Betreiber bis hin zu makroskaligen Herausforderungen politischer Entscheidungsträger. Ein besonderer Schwerpunkt liegt auf dem Windenergiemarkt. Die Ergebnisse deuten darauf hin, dass die Rolle von EUS für alle Marktteilnehmer aufgrund der ständig wachsenden Diversität an Informationen und Datenmengen im sich schnell digitalisierenden EE-Sektor immer wichtiger wird. Sie weisen ferner auf die Stärke und Notwendigkeit der IS Forschung im Hinblick auf ihre integrative Funktion zwischen anderen Forschungsbereichen hin und zeigen auf, wie diese Eigenschaft eingesetzt werden kann, um dem Bedarf an praxisorientierter Unterstützung für Entscheidungsträger zu begegnen

Valuation Methods in Renewable Energy Investments: An Explanatory Mixed-Methods Study among German and Swiss Investment Professionals

This research aims to evaluate the currently applied valuation approaches in practice among German and Swiss professional investors for renewable energy (RE) projects based on an explanatory, sequential, mixed-methods (MM) research approach, compared to existing financial theory. It additionally explores associated influencing factors, key equity value drivers, and ‘best practice’ approaches and/or improvements in order to propose a revised valuation approach specifically for such investments. The inferences (INFs) taken are obtained by integrating quantitative (QUAN) results from a survey of 111 practitioners with qualitative (QUAL) findings through in-depth interviews with 16 purposefully selected individuals from the pool of participants from the previous QUAN phase to explore those results in more detail. The results and findings were both reassuring and surprising while still detecting a certain gap between theory and practice. As main research outcomes, it can be illustrated that both systematic and unsystematic risks are relevant for performing valuations of such investments. More specifically, for the former, political and market risks are the most important risk components, and for the latter, weather-related volume risk is most important. Risk preferences and subsequently valuation are clearly influenced by experienced materialisation of risk. Discounted cash flow (DCF)-based valuation is state of the art in this valuation, even if multiples are applied as a simplified benchmarking approach. Encountered risk leads either to adjustment in the cash flows or in the applied discount rate, the former being the main approach to treat risk in valuation. The internal rate of return (IRR) approach is the most frequently applied valuation methodology, even if the net present value (NPV) approach is theoretically more consistent and even though many practitioners do not seem to be aware of the former’s potential drawbacks. Moreover, the market for such investments has agreed to apply a simplified flow to equity (FTE) valuation approach. It thus ignores the consideration of the right type of discount rate (a dynamic discount rate) for the typically applied autonomous financing structure based on project financing for simplification reasons. Market participants surprisingly still use the weighted average cost of capital (WACC) of the investing company, mostly as a basis for defining hurdle rates, even if finance theory could clearly demonstrate its irrelevance as a cost of capital (CoC) approach in DCF-based valuation. More sophisticated valuation methods are less known and not applied, even if the certainty equivalent (CE) and adjusted present value (APV) methods are promising, complementary methods to support conventional approaches for assessing the investment’s value protection ability and performing impairment test respectively. The discussion of the INF analysis results helps to increase the understanding of this complex topic and provides valuable insights into this usually hidden procedure. The applied MM approach allowed for the exploration of issues and the discussion of possible improvements in valuation practices, which would not be possible within a classic quantitative study. The developed concepts in this thesis provide practitioners, particularly equity investors, with powerful tools to define the relevant equity value drivers, to understand additional influencing factors in valuation and considerations of risk treatments in projects, and to value RE investments along the two dimensions of value creation and value protection