Research projects

Project CEMAPRE internal

TitleImpact of incentives and regulations on the investment in renewable energies
ParticipantsManuel Guerra, Alexandra Moura, Carlos Oliveira (Principal Investigator)
SummaryClimate changes and global warming are one of the biggest challenges of humanity and, accordingly,
many targets have been established by several countries and organizations to avoid dire consequences
of these phenomena. In particular, countries must attract investment in renewable energies, in order
to reduce the use of fossil energies, which are one of the biggest causes of global warming.
In this project, I propose to use real options and game-theoretical models to study how the current
support schemes may attract new investments in renewable energies. I also plan on assessing the
influence of incentives on investment in R&D centers, since this type of support may keep the
investment in renewables alive in the future. The analysis will be made both from the firm's point
of view, in order to maximize its profit, and from the society's point of view, in order to maximize
society welfare.
For this analysis, a different class of stochastic processes, the switching diffusions, will be used
to model market uncertainty, since these processes generalize the ones commonly used (such as the
geometric Brownian Motion) and because they fit the possibility of changes to the current
support schemes very nicely. Finally, quantitative and qualitative analysis to evaluate the
robustness of the results will be