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Risk Analysis in Renewable Energy System (RES) Investment for a Developing Country: A Case Study in Pakistan

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  • Izzet Alp Gul
  • Gülgün Kayakutlu
  • M. Özgür Kayalica

Abstract

Technological improvements allow changing a significant part of the electricity generation investments to renewable energies. Especially in emerging markets and energy import-dependent countries, shift to renewable energy generation became more important to break the links of dependency. Pakistan relies on imported fossil fuels; however, the country’s experience and ambition about the renewable energy transition gain prominence in recent years. Considering the long-term life cycle of energy infrastructure investments, possible risk factors and their dynamic nature must be analysed before the financial decisions are taken. This article aims to propose a system dynamics model for the risk analysis of investment life cycle. In this study, possible risk factors are detected and discussed in different categories. The casual loop diagram of possible risk factors and risk assessment model are designed, and the impacts are analysed. Case study of the proposed model in Pakistan highlighted the importance of commercial risks. The results achieved through this study will guide investors, sector participants and policymakers to develop stable strategies for promoting renewable energy in the country. JEL: Q42, P48, O13

Suggested Citation

  • Izzet Alp Gul & Gülgün Kayakutlu & M. Özgür Kayalica, 2020. "Risk Analysis in Renewable Energy System (RES) Investment for a Developing Country: A Case Study in Pakistan," Arthaniti: Journal of Economic Theory and Practice, , vol. 19(2), pages 204-223, December.
    • Handle: RePEc:sae:artjou:v:19:y:2020:i:2:p:204-223
    DOI: 10.1177/0976747920910824
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    Cited by:

    1. Rehman, Obaid ur & Ali, Yousaf & Sabir, Muhammad, 2022. "Risk assessment and mitigation for electric power sectors: A developing country's perspective," International Journal of Critical Infrastructure Protection, Elsevier, vol. 36(C).

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    More about this item

    Keywords

    Renewable energy system; energy investment; risk analysis; system dynamics; Pakistan;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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