1 The Price of Policy Risk – Empirical Insights from Choice Experi- ments with European Photovoltaic Project Developers

Successfully making the transition to renewable energy is high on the policy agenda in many countries around the world, and one technology that has particular potential for contributing to a future low-carbon energy supply is solar photovoltaic (PV) technology. Given the current cost of PV, market diffusion crucially depends on policy incentives such as feed-in tariffs (FITs), which have been im-plemented in a number of countries. FITs have been praised for their effectiveness but have also re-ceived mixed reviews when it comes to assessing their efficiency. A key empirical puzzle is why simi-lar FITs lead to differing outcomes (in terms of newly installed PV capacity) in different countries. Previous research suggests that answering this question requires a better understanding of policy risk, rather than just the level of return (e.g. the level of the FIT). This study contributes to this literature by conducting choice experiments to empirically examine the influence of certain aspects of policy risk on the decision of a PV project developer to invest in a given country. Choice experiments are widely used in marketing research and have recently become increa-singly popular in environmental and resource economics because they allow for modeling of realistic trade-off situations while avoiding some of the pitfalls of social desirability bias. Based on an origina