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Investment in Renewables under Uncertainty: Fitting a Feed-in Scheme into ETS

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  • Federico Boffa, Stefano Clò, and Alessio D'Amato

Abstract

We analyze incentives to invest in renewable energy technologies induced by the overlap of two types of policies: feed-in schemes and carbon mitigation instruments. We find that results differ markedly depending on the specific types of policies in place, reflecting different impacts of uncertainty. As a result, the recent reform to the EU-ETS system that has established the Market Stability Reserve (MSR), effective in 2019, requires to appropriately fine-tune the direct RES-E support schemes. We show that this may involve moving away from feed-in tariffs towards feed-in premia. Our results suggest that the schemes currently adopted in Germany and in Italy, broadly based on feed-in premia for large generators and on feed-in tariffs for the small ones, could well fit also the post-MSR EU carbon mitigation policy. To the contrary, other countries (e.g. France and the U.K.) may have to modify their support schemes as the MSR will become operational.

Suggested Citation

  • Federico Boffa, Stefano Clò, and Alessio D'Amato, 2016. "Investment in Renewables under Uncertainty: Fitting a Feed-in Scheme into ETS," The Energy Journal, International Association for Energy Economics, vol. 0(Bollino-M).
    • Handle: RePEc:aen:journl:ej37-si2-boffa
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    Cited by:

    1. Fusco, Elisa & Maggi, Bernardo & Rizzuto, Livia, 2022. "Alternative indicators for the evaluation of renewables in Europe: An efficiency approach," Renewable Energy, Elsevier, vol. 190(C), pages 48-65.
    2. Zhao, Xiaoli & Yao, Jin & Sun, Chuyu & Pan, Wengeng, 2019. "Impacts of carbon tax and tradable permits on wind power investment in China," Renewable Energy, Elsevier, vol. 135(C), pages 1386-1399.

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