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Renewable energy investment risk evaluation model based on system dynamics

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  • Liu, Ximei
  • Zeng, Ming

Abstract

China currently faces the dual constraints of developing low-carbon economy and enabling sustainable energy utilization. It is an inevitable choice for the strategic transformation of economy development and energy development in China to develop renewable energy. Since renewable energy is a capital-and tech-intensive industry, which requires a large amount of investment and a high level of technology innovation. Investors face many different uncertainties when making a renewable energy project investment decision. Therefore, it has great significance for the development of renewable energy to evaluate the risks in renewable energy investment projects, and then make the best investment decisions. Based on above background, the topic of renewable energy investment risk is studied in this paper using system dynamics method. In the first part of the work, three main risks in renewable energy investment, technical risk, policy risk and market risk, have been discussed, and then causal loop diagram of investment risk and risk assessment model have been established by the system dynamics method, after that a numerical example was given in the last part of the paper. The result of the numerical example indicated that policy risk was the main factor affecting the investment in the early development stage, while policy risk and technology risk decline gradually, market risk has gradually become the main uncertainty affecting the investment in the mature development stage.

Suggested Citation

  • Liu, Ximei & Zeng, Ming, 2017. "Renewable energy investment risk evaluation model based on system dynamics," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 782-788.
    • Handle: RePEc:eee:rensus:v:73:y:2017:i:c:p:782-788
    DOI: 10.1016/j.rser.2017.02.019
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    References listed on IDEAS

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    1. Ming, Zeng & Ximei, Liu & Yulong, Li & Lilin, Peng, 2014. "Review of renewable energy investment and financing in China: Status, mode, issues and countermeasures," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 23-37.
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