Management Summary Research Study „Renewable Energy Investments Under Cannibalization: A Semi-Systematic Review“

The study examines how the literature values wind and solar investments in a setting where their own expansion depresses the electricity prices on which their revenues depend, a phenomenon known as revenue cannibalization. The authors conduct a semi-systematic review of 101 studies identified in two phases: a systematic Web of Science search and targeted citation snowballing, complemented by a bibliometric analysis of co-citation and bibliographic coupling.

Standard appraisal tools such as discounted cash flow, NPV, LCOE and even the more advanced real options analysis, treat the electricity price as exogenous and therefore systematically overstate project revenues; the bibliometric analysis confirms that the appraisal literature is disconnected from the energy-economics research that quantifies cannibalization. The effect is large and uneven across technologies: each percentage point of added penetration lowers solar revenues by roughly 1.9 % but wind revenues by only 0.2 %, and accounting for cannibalization can turn a wind project’s expected 33 % profit into a range from 13 % to −40 %. Mitigation measures (storage, sector coupling, geographic diversification, carbon pricing, PPAs) are assessed in isolation and from a central-planner perspective, even though they compete for the same arbitrage opportunities. The practical implication is that investors, lenders and policymakers should model the electricity price as endogenous and decide on a portfolio of mitigation measures rather than on a single project. As a solution the study proposes a two-level framework for doing so.

Target groups of stakeholders: Renewable energy investors and developers, project finance providers and banks, utilities and power traders, transmission system operators, energy regulators and policymakers, and the energy economics research community.

Citation: Pustějovský, Z., & Hudík, M. (2026). Renewable energy investments under cannibalization: A semi-systematic review. Journal of Economic Surveys. Advance online publication. https://doi.org/10.1111/joes.70153

Source: https://onlinelibrary.wiley.com/doi/10.1111/joes.70153