Neglecting exit doors
How does regret cost shape the irreversible execution of renewable energy megaprojects?
Avri Eitan (Universiteit Utrecht)
Itay Fischhendler (The Hebrew University of Jerusalem)
Alfons van van Marrewijk (BI Norwegian Business School , TU Delft - Design & Construction Management, Vrije Universiteit Amsterdam)
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Abstract
The energy transition process nowadays is characterized by the replacement of fossil fuels-based means of production with renewable energy (RE). Alongside the diffusion of decentralized RE, this process is associated with the increased promotion of RE megaprojects. Such megaprojects, however, are often shaped by path-dependent lock-ins and thus continue to be promoted with limited changes despite the emergence of better alternatives along the way. This study explores the role of lock-ins in the irreversibility of RE megaprojects while highlighting the notion of regret cost. In particular, the study sheds light on the influence of lock-ins within megaprojects, specifically focusing on their execution stage. Using the establishment process of Ashalim, a giant thermal solar power station in southern Israel, as a case study, we demonstrate how various lock-ins increase regulators’ regret cost, thus escalating their commitment to the megaproject and causing them to neglect diverse “exit doors” during execution. We thus illuminate the irreversibility of RE megaprojects and question their capability to meet the growing need of energy markets for flexibility.
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