Emmanuel Berrebi

Abstract

Final version abstract: What drives locational generation investment decisions in zonal electricity markets? This study examines renewable energy investors' location choices across 21 EU countries (2014-2019) for investments exceeding 1 MW, using a logit model with country fixed effects. The analysis operationalizes multiple locational signals—resource availability, land costs, network capacity, administrative constraints, and social acceptance. Key findings first confirm natural resource availability as the strongest investment determinant in the absence of designed locational mechanisms. Then it counterintuitively shows that land and node with available capacity negatively impact investment location meaning that investors tend to select already crowded nodes potentially increasing the likelihood of congestion. Technology-specific analysis reveals land costs matter more for solar, while network and social acceptance constraints weigh more on wind. Despite country-level variation, the ranking of determinants remains consistent. The study reveals investor behavior complexity in zonal markets and suggests new empirical evidence with potential implications for designing compensation mechanisms and site allocation procedures.