September 29th, 2:30-4pm, E62-346
Holding Up Green Energy: Counterparty Risk in the Indian Solar Power Market
Speaker: Nick Ryan (Yale)
Seminar title: “Holding Up Green Energy: Counterparty Risk in the Indian Solar Power Market”
Date/Time: September 29th, 2:30-4pm EST
Abstract: This paper studies how the risk of hold-up affects procurement. I use data on the universe of solar power auctions in India. The Indian context allows clean estimates of counterparty risk, because solar plants set up in the same states, by the same firms, are procured in auctions intermediated by either risky states themselves or the trusted central government. I find that the counterparty risk of an average state increases solar prices by 10%. This risk premium sharply reduces investment, because demand for green energy is elastic. Contract intermediation by the central government eliminates the counterparty risk premium.