Course code FORN120

FORN120 Introduction to Energy Economics

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Showing course contents for the educational year 2021 - 2022 .

Course responsible: Kristin Linnerud
ECTS credits: 5
Faculty: Faculty of Environmental Sciences and Natural Resource Management
Teaching language: NO
(NO=norsk, EN=Engelsk)
Teaching exam periods:
Course frequency: Annually
First time: Study year 2021-2022
Last time: 2022V
Course contents:
In this course, the student gets an introduction to modern investment theory and learns through examples from the power sector and practical exercises on spreadsheets how the theory can be used to make decisions. Central to the course is the net present value method, where future cash flows over the project period are converted to present values ​by requiring that capital earns a risk adjusted rate of return. Budgeting future cash flows requires insight into the cost structure of power-producing technologies, and the student gains a simple insight into this. Students also get an overview of other investment rules, and the advantages and disadvantages of these.
Learning outcome:


Be able to present the most widely used analytical methods in Finance used to assess the profitability and risk of investment projects.

Be able to explain how uncertainty affects investors’ risk and how such risk can be included in an investment analysis.

Be able to present criteria for assessing whether it is profitable for the investor to carry out such investment projects.

Be able to combine this knowledge to develop good decision rules for specific investment projects in the power sector.


For a given investment project in the power sector, be able to identify which cash flows the project generates over the project period.

Be able to use spreadsheets to calculate the net present value of such projects and the associated unit costs of the electricity produced.

Be able to use spreadsheets to show how sensitive the net present value and unit cost are to variations in the discount rate, project life and factors that affect cash flows.

General competence

Have competence on how investment theory can be applied to decisions in the power sector.

Learning activities:
Lectures, exercises where we use spreadsheets and assignments.

Bøhren, Ø., Gjærum, P.I. (2020). Finance: Introduction to investment and financing. Vigmostad & Bjørke AS. Edition 2. ISBN 9788245023282.

Peake, Stephen (2018). Renewable Energy. Power for a sustainable future. Fourth edition. Oxford University Press. Selected chapters.

Recommended prerequisites:

Total assessment:

  • Written examination (3 hours) counts 70%
  • Portfolio assessment: Submission of assignments counts 30%

Both parts must be passed to pass the course.

Grading system: A-E/Not passed

Nominal workload:
125 hours.
Entrance requirements:
An external and internal examiner evaluates the student's work.
Allowed examination aids: B1 Calculator handed out, no other aids
Examination details: Combined assessment: Letter grades