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Regionalized Discount Rate to Evaluate Renewable Energy Projects in Colombia

Author

Listed:
  • Jorge Barrientos Mar n

    (University of Antioquia, Colombia.)

  • Fernando Villada

    (University of Antioquia, Colombia.)

Abstract

In this paper we are interested in estimating the discount rate for electricity generation projects using renewable resources. More precisely we estimate the weighted average cost of capital (WACC). One of the most important feature of this research is that our WACC must be differentiated by regions, which is a challenging purpose taking into account that Colombia is a country with many regions that greatly differ among themselves. This goal requires estimating a risk parameter for each region, in this case for each state of the country, which would have the immediate effect of regionalizing the WACC for renewables non-conventional generation energy projects. it is worth noting that the emerging market bond index (EMBI+) is not a useful measurement of risk at regional level, so we have to look for a variables set in order to capture that risk. We propose to consider variables associated with corruption and violence levels in each state of the country in order to identify regional WACC.

Suggested Citation

  • Jorge Barrientos Mar n & Fernando Villada, 2020. "Regionalized Discount Rate to Evaluate Renewable Energy Projects in Colombia," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 332-336.
    • Handle: RePEc:eco:journ2:2020-02-39
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    References listed on IDEAS

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    1. Domenico Campisi & Simone Gitto & Donato Morea, 2017. "Light Emitting Diodes Technology in Public Light System of the Municipality of Rome: An Economic and Financial Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 7(1), pages 200-208.
    2. Álvaro Riascos, Miguel Bernal, Luciano de Castro and Shmuel Oren, 2016. "Transition to Centralized Unit Commitment An Econometric Analysis of Colombia's Experience," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
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    Cited by:

    1. Dimitrios Kontogiannis & Dimitrios Bargiotas & Aspassia Daskalopulu & Athanasios Ioannis Arvanitidis & Lefteri H. Tsoukalas, 2022. "Error Compensation Enhanced Day-Ahead Electricity Price Forecasting," Energies, MDPI, vol. 15(4), pages 1-21, February.
    2. Jorge Armando Bedoya-Cadavid & Ángela María Lanzas-Duque & Harold Salazar, 2023. "WACC for Electric Power Transmission System Operators: The Case of Colombia," Energies, MDPI, vol. 16(2), pages 1-13, January.
    3. Ricardo Moreno & Diego Larrahondo, 2021. "The First Auction of Non-Conventional Renewable Energy in Colombia: Results and Perspectives," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 528-535.
    4. Ricardo Moreno & Sergio A. Cantillo & Lilian A. Carrillo-Rodriguez, 2021. "Risk Analysis of Firm Energy Coverage in Colombia in the Medium Term," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 220-226.

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    More about this item

    Keywords

    electricity generation; renewable energy resources; weighted average cost of capital; country and regional risk.;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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