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Gollier, Christian
(2026)
Discounting along the merit order, with an application to the electricity market.
TSE Working Paper, Toulouse
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Abstract
Within the same sector, technologies yielding larger variable costs are more sensitive
to disruptions during a recession. For this reason, assets lower in the merit order should
be valued using a larger risk-adjusted discount rate. We characterize the efficient discount
rates along the technological merit order in a standard CCAPM framework, and we link
them to their option values. We apply our results to the electricity sector in France,
showing that the CCAPM beta of fossil electricity is more than twice that of renewable
or nuclear electricity. This fossil beta is increasing with the carbon price. We also propose
a methodology to measure the value creation of different generation technologies in a given
electricity mix by comparing their levelized costs and prices of electricity that take risks
and intermittency into account.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | April 2026 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Energy transition, CCAPM beta, option pricing, carbon price, cost-benefit analysis. |
| JEL Classification: | G12 - Asset Pricing; Trading volume; Bond Interest Rates H43 - Project Evaluation; Social Discount Rate Q48 - Government Policy |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse Capitole |
| Site: | UT1 |
| Date Deposited: | 10 Jul 2026 09:47 |
| Last Modified: | 10 Jul 2026 09:47 |
| OAI Identifier: | oai:tse-fr.eu:131967 |
| URI: | https://publications.ut-capitole.fr/id/eprint/53829 |
