Win-win? Or win-lose? Game theory and decision analysis applied to the case of solar PV investments in Indonesia under the CDM

Abstract

Renewable energy technologies are considered an important instrument in achieving the double goals of sustainability and cost-effective abatement contained in the Clean development mechanism. However, previous studies indicate that the Clean development mechanism needs renewables more than renewables need the Clean development mechanism. This thesis investigates the relationship further by construction a four-leveled NPV model for the specific case of a small-scale solar photovoltaic power plant project in Indonesia. Special emphasis is put on the micro-level incentives of the players involved and how the incentives align. In addition, the effects of risk regarding project outcome and the possibility of CDM rejection are investigated. Conclusions support previous research in the fact that the impact of Clean development mechanism revenues on renewable energy technologies in general and solar photovoltaic plants in particular is limited. Further, it is uncovered that the incentives of the players do not necessarily align smoothly. Finally, some policy implications of the results are discussed.