Competitive electricity: incentive contracts and bid parameters

There is considerable interest in investment in electric power but few investor financed projects have actually taken off. The difficulty, most often, is that the investor and the host system or government cannot reach agreement on issues such as the rate of return, risk sharing and long term guarantees. This paper addresses this issue from the perspective of incentive contracts incorporating risk sharing parameters whose values are set to account for perceptions of risk magnitude and the degree of willingness to take risks in relation to expected returns. The paper demonstrates the application of modelling techniques to resolve the conflicting interests preventing many projects from reaching fruition. Artificial neural networks facilitate the integration of commercial factors with social, management and technical variables.<
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