Using investment appraisal models in strategic negotiation: the cultural political economy of electricity generation

Although accepting that the Discounted Cash Flow model of investment appraisal has well known technical limitations, researchers have begun to explore its performative properties. This paper demonstrates how the Discounted Cash Flow model frames negotiations between actors around narratives of economization, marketization and financialization in a regulated industry. Reconnecting economics and politics, the theory of Cultural Political Economy is used to interpret and evaluate an empirical study of Great Britain's electricity generating industry. Although alternative imaginaries, based on political and employment goals, have historically influenced investment decision making in the industry, the current narrative of investment appraisal is dominated by Discounted Cash Flow models. These models have allowed industry players to construct imaginaries of an investment hiatus, leading to the possibility of future power cuts and blackouts, and a need for guaranteed prices.