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The Impact of Behavioral Factors in the Renewable Energy Investment Decision Making Process: Conceptual Framework and Empirical Findings

Author

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  • Masini, Andrea
  • Menichetti , Emanuela

Abstract

Investments in renewable energy (RE) technologies are regarded with increasing interest as an effective means to stimulate growth and accelerate the recovery from the recent financial crisis. Yet, despite their appeal, and the numerous policies implemented to promote these technologies, the diffusion of RE projects remains somehow below expectations. This limited penetration is also due to a lack of appropriate financing and to a certain reluctance to invest in these technologies. In order to shed light on this phenomenon, in this paper we examine the decision making process underlying investments in RE technologies. We propose and test a conceptual model that examines the structural and behavioral factors affecting the investors decisions as well as the relationship between RE investments and portfolio performance. Applying econometric techniques on primary data collected from a sample of European investors, we study how the investors a-priori beliefs, their preferences over policy instruments and their attitude toward technological risk affect the likelihood of investing in RE projects. We also demonstrate that portfolio performance increases with an increase of the RE share in the portfolio. Implications for scholars, investors, technology managers and policy makers are derived and discussed.

Suggested Citation

  • Masini, Andrea & Menichetti , Emanuela, 2013. "The Impact of Behavioral Factors in the Renewable Energy Investment Decision Making Process: Conceptual Framework and Empirical Findings," HEC Research Papers Series 974, HEC Paris.
  • Handle: RePEc:ebg:heccah:0974
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    Cited by:

    1. John Foster & Liam Wagner, 2014. "International experience with transformations in electricity markets: A Short Literature Review," Energy Economics and Management Group Working Papers 2-2014, School of Economics, University of Queensland, Australia.
    2. Aleksandra Lukasik, "undated". "Influence of regulatory risks on private investments in wind energy — a financial investor’s perspective," NEURUS papers neurusp186, NEURUS - Network of European and US Regional and Urban Studies.
    3. Michael L. Polemis & Achilleas Spais, 2020. "Disentangling the drivers of renewable energy investments: The role of behavioral factors," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2170-2180, September.

    More about this item

    Keywords

    Adaptive conjoint analysis; behavioral finance; investments; renewable energy policy; multivariate regression;
    All these keywords.

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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