Conference Agenda
Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
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Daily Overview |
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Egg-Timer: Electricity Markets and Energy Systems Location: D-110 Session Chair: Yuxin Kang, Duke Univeristy | |
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Endogenous cost of capital, capital composition, and credit constraints in the energy transition 1: ifo-Institut for economic research, Germany; 2: TU-München We demonstrate econometrically that European firms’ active in renewable investments experience increases in cost of debt when the debt-to-equity ratio rises and decreases when total assets increase. Moreover, return on equity decreases in the ratio but increases in total assets. Depending on the debt-to-equity ratios, cost of equity are around 8 to 9 times higher than cost of debt. This is particularly important for the European energy transition as capital-intense technologies such as wind, solar, and batteries substitute for variable cost-intense ones. We use the econometric findings to develop a theoretical model of firm investment decisions considering endogenous cost of capital and credit constraints. We implement the developed theoretical model into a numerical optimization framework (EUREGEN ) that is intended to optimize the European energy transition by focusing on electricity and hydrogen investments. We find that European 2050 average electricity prices increase to 34 e/MWh. Compared to widely used approaches in the literature this is an substantial increase. | |