Critiques of the Existing Techniques for the Evaluation of Renewable Energy Projects

Renewable energy investment is an integral part of sustainable economic development agenda. Whereas some important advances have been made in recent years to assist project investors in evaluating real options embedded in renewable energy projects and making better use of financial risk management instruments, this research asserts that, owing to failure to consider both behavioral uncertainty and the limit of risk transfer, these approaches may still lead to a biased evaluation result. Drawing on a novel concept of "risk-bearing capacity", investors can coherently incorporate the choice of financial protection into investment evaluation.