Leveraging Policy for Renewable Energy Development in Industrialized Countries and Emerging Markets

Renewable energy has the ability to play a dominate role in addressing both rising energy demand and the need for sustainable growth. Various policy measures and incentives have aided its growth in both developed and developing countries. This dissertation analyzes existing policies and financial mechanisms used to encourage renewable energy development through three academic papers. I first propose the carbon revenue bond as a new financing tool to complement the environmental credit markets that exist in developed countries. Stochastic modeling techniques are used to simulate future credit prices and determine bond value. Use of the carbon revenue bond is illustrated through three examples of wind energy projects in the European, Australian and New Jersey markets. In the absence of mature markets in developing countries, I develop the strategic structure matrix as a new framework to explain the various effects of policy measures in order to better shape future policy design. By synthesizing previous literature on how organizations are able to affect the diffusion of a new technology, the strategic structure matrix is able to deepen understanding of how policy can influence renewable energy growth. The explanatory power of the framework is demonstrated through a case study on the different paces of wind power diffusion in five Indian states. Lastly, I evaluate the Clean Development Mechanism as a tool to encourage investment from developed nations for renewable infrastructure in developing countries. I create an agent-based model to simulate investment decisions under different improvements to the program, providing quantitative support for the effectiveness of some improvements over others. In addition to each paper's individual contributions, the findings collectively provide important implications for the future of renewable energy policy and its ability to support continued sustainable growth

Kommersiella skogsmarksinvesteringar : en jämförande studie av ägarmål

Since the early 1990s interest rates have been decreasing, which has led to lowered yield on traditional secure financial assets as bonds. It has resulted in a flow of capital in the financial market towards alternative investments in the search for yield beyond the stock market. The forest asset has traditionally been desirable in a portfolio for the diversification aspect associated with the unique characteristic of the biological growth being uncorrelated to the financial markets. However, the interest in forestland investments has become more diverse through the monetization of non-timber values. In Sweden, the price of forestland available for purchase by juridical persons has increased rapidly since the abolishment of the price regulation in the early 1990s. This study aims to identify forest owner categories of commercial forest investors within the Swedish forestland property market. The thesis used a multiple case study design conducted through a mixed-method data collection combining quantitative and qualitative data. The quantitative part consisted of a total survey from secondary data of the last 20 years' transactions of forestland from juridical persons. It was followed by a landowner classification which constructed owner categories present on the Swedish property market of forestland. The quantitative analysis was followed by a qualitative part, using semi-structured interviews to understand the owner categories objectives and perception of risk and opportunities with forestland ownership. The data analysis method used was theoretical interpretation and the applied theories were the net present value (NPV), Capital Asset Pricing Model (CAPM), Vertical Integration (VI), taxes, and types of risks in forestry. The results from the quantitative part derived nine owner categories from the secondary data, where six of the categories were related to forestry land use. The qualitative analysis indicated that the different owner categories have various objectives of acquiring forestland. Forestland was primarily seen as a financial asset and as a strategic resource for the industries. Taxes were not found to be a significant reason to invest in forestland for any owner category. The owner categories have in common that they are positive towards increasing their holdings. The main perceived risk among the owner categories was associated with the legislature, reputational and physical risks. The legislature and reputational risks are mainly connected to the uncertainty of prerequisites of the silviculture related to policy interventions. The contribution of this thesis consisted of constructing a classification of forestland acquirers in the Swedish property market of forestland. Furthermore, it identified different owner categories objectives associated with forestland ownership and the category's perceived risk and opportunities.Under de senaste decennierna har marknadsräntorna sjunkit, vilket har lett till sänkt avkastning på traditionellt säkra finansiella tillgångar som obligationer. Det har resulterat i ett flöde av kapital på den finansiella marknaden mot alternativa investeringar i sökandet efter avkastning bortom aktiemarknaden. Skog som tillgångsslag har traditionellt varit önskvärd i en portfölj för dess diversifieringsaspekt associerad med den unika egenskapen i skogens biologiska tillväxt. Under det senaste decenniet har intresset i skogsmark vidgats genom en sakta monetärisering av icke virkesrelaterade värden. I Sverige har priset på skogsmark som kan köpas av juridiska personer ökat snabbt under de senaste decennierna. Denna studien syftar till att identifiera kategorier av kommersiella skogsinvesterare inom den svenska skogsfastighetsmarknaden. Studien använde en fallstudiedesign utförd genom en datainsamling med en ”mixed-metod” som kombinerar kvantitativa och kvalitativa data. Den kvantitativa totala undersökningen innefattade sekundärdata i form av transaktioner av skogsmark de senaste 20 åren som även användes som grund för att konstruera ägarkategorier som finns på den svenska skogsfastighetsmarknaden. Det följdes av en kvalitativ del, som använde semistrukturerade intervjuer för att förstå ägarkategoriernas mål och uppfattning om risker och möjligheter med skogsägande. Den använda dataanalysmetoden var teoretisk tolkning, de använda teorierna var nettonuvärdesmetoden (NPV), Capital Asset Pricing Model (CAPM), Vertical Integration (VI), skatter och typrisker för skog som tillgång. Resultatet från den kvantitativa delen skapade nio ägarkategorier från sekundärdata, där sex av ägarkategorierna var relaterade till skogsbruk som markanvändning. Följande kvalitativa del indikerade att de olika ägarkategorierna har flertalet olika mål att förvärva skogsmark. Innehav av skogsmark sågs som en finansiell tillgång och en strategisk resurs for industriföretagen, skatter visade sig inte vara en betydande anledning till att investera i skogsmark för någon ägarkategori. Gemensamt för de studerade ägarkategorierna i den här fallstudien var att alla dessa är positiva till att öka sina skogsinnehav. Den huvudsakliga upplevda risken för ägarkategorierna är förknippad med lagstiftningsrisker, opinions- och fysiska risker. Lagstiftnings- och opinionsrisker är främst kopplade till osäkerheten om skogsbrukets förutsättningar relaterade till politiska beslut. Bidraget från denna studie var en ägarklassificering på förvärv av skogsmark på den svenska skogsfastighetsmarknaden. Studien bidrog även till att förklara olika mål för ägarkategorier förknippade med deras skogsägande tillsammans med olika kategoriers upplevda risker och möjligheter med ägande av skogsmark

Australia's Carbon Tax: A Sheep in Wolf's Clothing?

The Australian Government has produced a CO2-equivalent tax proposal with a difference, it is a short prelude to an emission trading scheme that will allow the increasing rate of emissions to continue, while being a net cost to the Treasury. That cost extends to allowing major emitters to make guaranteed windfall profits from pollution permits. The emission trading scheme suffers numerous problems, but the issues raised show taxes can also be watered down and made ineffectual through concessions. Taxpayers will get no assets from the billions of dollars to be spent buying-off the coal generators or other polluters. The scheme hopes to stimulate private investors to create an additional 12 percent in renewable electricity generation by 2020. A serious emissions reducing alternative would be to create a nationalised electricity sector with 100 percent renewable energy within a decade. We explore the difficulties of implementing meaningful greenhouse gas taxes in Australia.greenhouse gases; taxation; emission trading; climate change; regulation; renewable energy; Australia

Risk-based methods for sustainable energy system planning: a review

The value of investments in renewable energy (RE) technologies has increased rapidly over the last decade as a result of political pressures to reduce carbon dioxide emissions and the policy incentives to increase the share of RE in the energy mix. As the number of RE investments increases, so does the need to measure the associated risks throughout planning, constructing and operating these technologies. This paper provides a state-of-the-art literature review of the quantitative and semi-quantitative methods that have been used to model risks and uncertainties in sustainable energy system planning and feasibility studies, including the derivation of optimal energy technology portfolios. The review finds that in quantitative methods, risks are mainly measured by means of the variance or probability density distributions of technical and economical parameters; while semi-quantitative methods such as scenario analysis and multi-criteria decision analysis (MCDA) can also address non-statistical parameters such as socio-economic factors (e.g. macro-economic trends, lack of public acceptance). Finally, untapped issues recognised in recent research approaches are discussed along with suggestions for future research

Investment in Enhanced Landfill Mining (ELFM): a real option approach

The marginal socio-economic condition of many people, lack of cooperative culture and cultural aversion towards waste, absence of well-defined enforcement mechanism to effectively coerce the population, restricted public service funding, high rate of population growth and the resulting ever increasing waste production are some of the major challenges faced by most developing countries, including Ethiopia, in an effort to implement effective and efficient municipal solid waste management (MSWM). Koshe/Repi, an old landfill in Addis Ababa, Ethiopia, is considered to be a huge opportunity in terms of material recovery and energy production. In fact, by adopting Enhanced Landfill Mining (ELFM) as approach for handling the cumulated waste, considerable net economic benefits may be attached to energy production (Waste-to-Energy, WtE) and materials recovery (Waste-to-Material, WtM). In line with this, the thesis produces a preliminary decision making model for Koshe/Repi ELFM project by considering the time evolution of predicted CO2 emission reduction and landfill gas recovery. To achieve this objective, we take a real option perspective and use the binomial method for assessing the economic profitability of the project. Empirically, the model is supported by data from Addis Ababa city municipality, community development research and Ethiopian electric power corporation (EEPCo). Results of the model reveals that, the percentage (or share), α, of total revenue from emission reduction to be reimbursed to a private firm, is crucial in attracting investments to Koshe/Repi ELFM project. Moreover, for a specific share value (e.g. 16%), where the net present value (NPV) is negative ($–0.18 million), the low annual volatility of electricity price (15%) is high enough to offset the negative NPV. As a result, the project is worth to invest for share value between 15% and 17% included, even though the NPV is negative. Finally, this study call for further investigation focusing on the estimation of determinant exogenous parameters such as annual volatility, carbon credit, investment and operation costs, salvage value and penalty cost

A Modeling, Optimization, and Analysis Framework for Designing Multi-Product Lignocellulosic Biorefineries

The objective of this research is to propose a methodology to develop modular decision analysis frameworks to design value chains for enterprises in the renewable fuels and chemicals sector. The decision support framework focuses on providing strategic decision support to startup and new product ventures. The tasks that are embedded in the framework include process and systems design, technology and product selection, forecasting cost and market variables, designing network capacities, and analysis of risks. The Decision support system (DSS) proposed is based on optimization modeling; systems design are carried out using integer programming with multiple sets of process and network configurations utilized as inputs. Uncertainty is incorporated using real options, which are utilized to design network processing capacity for the conversion of biomass resources. Risk analysis is carried out using Monte Carlo methods. The DSS framework is exemplified using a lignocellulosic biorefinery case study that is assumed to be located in Louisiana. The biorefinery utilizes energy crops as feedstocks and processes them into cellulosic biofuels and biobased chemicals. Optimization modeling is utilized to select an optimal network, a fractionation technology, a fermentation configuration, and optimal product recovery and purification unit operations. A decision tree is then used to design incremental capacity under uncertain market parameters. The valuation methodology proposed stresses flexibility in decision making in the face of market uncertainties as is the case with renewable fuels and chemicals. The value of flexibility, termed as “Option Value” is shown to significantly improve the net present value of the proposed biorefinery. Monte Carlo simulations are utilized to develop risk curves for alternate capacity design plans. Risk curves show a favorable risk reward ratio for the case of incremental capacity design with embedded decision options. The framework proposed here can be used by enterprises, government entities and decision makers in general to test, validate, and design technological superstructures and network processing capacities, conduct scenario analyses, and quantify the financial impacts and risks of their representative designs. We plan to further add functionality to the DSS framework and make available the tools developed to wide audience through an “open-source” software distribution model

Use of Economic and Mathematical Modeling Tools in Planning Investments in Fixed Assets

In order to maximize the effectiveness of fixed assets use it is necessary to assess the impact of organizational factors on capital productivity of fixed assets, and also to assess the feasibility of capital investment in fixed assets. The purposes of the study are to design an economic-mathematical model that makes it possible to predict a value of capital productivity knowing the values of different factors, as well as to calculate the effectiveness of capital investment in fixed assets on the example of the regional branch of Tatarstan Energy Company. During the correlation and regression analysis of the Tatarstan energy company branch, the authors found that the cost of the active part of fixed assets has the greatest impact on the capital productivity of fixed assets, so the company is recommended to increase the active part of fixed assets. The proposed approach to scenario forecasting of capital investments in fixed assets allows to assess the prospects for changes in the company's financial performance as a result indicator of the company's performance

Supply Chain Carbon Management

Sustainable supply chain and carbon management have seen a growing interest in the last decade due to the increasing concerns about global warming and climate change. Policymakers, researchers, and executives have taken various roles in efforts to better measure and control greenhouse gas emissions. This book chapter aims to discuss the current state of the art, and key motivations for businesses to decrease emissions, and different policies and regulations that have been designed to incentivize carbon reduction and enhance the environmental awareness of all stakeholders. The chapter also examines the methodologies for measuring and managing carbon emissions of an organization and its supply chain. Further, it discusses carbon management issues related to reverse logistics, life cycle assessment and double counting of emissions

Market and Economic Modelling of the Intelligent Grid: End of Year Report 2009

The overall goal of Project 2 has been to provide a comprehensive understanding of the impacts of distributed energy (DG) on the Australian Electricity System. The research team at the UQ Energy Economics and Management Group (EEMG) has constructed a variety of sophisticated models to analyse the various impacts of significant increases in DG. These models stress that the spatial configuration of the grid really matters - this has tended to be neglected in economic discussions of the costs of DG relative to conventional, centralized power generation. The modelling also makes it clear that efficient storage systems will often be critical in solving transient stability problems on the grid as we move to the greater provision of renewable DG. We show that DG can help to defer of transmission investments in certain conditions. The existing grid structure was constructed with different priorities in mind and we show that its replacement can come at a prohibitive cost unless the capability of the local grid to accommodate DG is assessed very carefully.Distributed Generation. Energy Economics, Electricity Markets, Renewable Energy

The Private and Public Economics of Renewable Electricity Generation

Generating electricity from renewable sources is more expensive than conventional approaches, but reduces pollution externalities. Analyzing the tradeoff is much more challenging than often presumed, because the value of electricity is extremely dependent on the time and location at which it is produced, which is not very controllable with some renewables, such as wind and solar. Likewise, the pollution benefits from renewable generation depend on what type of generation it displaces, which also depends on time and location. Without incorporating these factors, cost-benefit analyses of alternatives are likely to be misleading. However, other common arguments for subsidizing renewable power – green jobs, energy security and driving down fossil energy prices – are unlikely to substantially alter the analysis. The role of intellectual property spillovers is a strong argument for subsidizing energy science research, but less persuasive as an enhancement to the value of installing current renewable energy technologies.