IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-05688555.html

Discounting along the merit order, with an application to the electricity market

Author

Listed:
  • Christian Gollier

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Within the same sector, technologies yielding larger variable costs are more sensitive to disruptions during a recession. For this reason, assets lower in the merit order should be valued using a larger risk-adjusted discount rate. We characterize the efficient discount rates along the technological merit order in a standard CCAPM framework, and we link them to their option values. We apply our results to the electricity sector in France, showing that the CCAPM beta of fossil electricity is more than twice that of renewable or nuclear electricity. This fossil beta is increasing with the carbon price. We also propose a methodology to measure the value creation of different generation technologies in a given electricity mix by comparing their levelized costs and prices of electricity that take risks and intermittency into account.

Suggested Citation

  • Christian Gollier, 2026. "Discounting along the merit order, with an application to the electricity market," Working Papers hal-05688555, HAL.
    • Handle: RePEc:hal:wpaper:hal-05688555
    Note: View the original document on HAL open archive server: https://hal.science/hal-05688555v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-05688555v1/document
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-05688555. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.