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European renewable energy policy at crossroads--Focus on electricity support mechanisms

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  • Fouquet, Doerte
  • Johansson, Thomas B.
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    Abstract

    The European Union has adopted targets for the expanded use of renewable energies (REs) as one mean to achieve improved energy security, reduced greenhouse gas (GHG) emissions, and improved competitiveness of the European economies. Realising that rapid expansion of RE will not happen in the energy market place, as it now exists, various support mechanisms are under consideration, most prominently these may be grouped into two major categories, tradable green certificates (TGC) and feed-in tariffs (FiT). Experiences from a number of countries in Europe suggest that FiT deliver larger and faster penetration of RE than TGC, at lower cost. The two major systems are compared in overall terms. In a TGC system, a target for RE penetration is set by public authorities seeking to minimise cost for achieving this target. The certificate price is set by the market. In a FiT system, public authorities set an effective price but are not limiting the quantity installed. This has led to impressive growth rates, particularly in Denmark, Germany, and Spain. It is found that investor risks are much lower in a FiT system, and that innovation incentives are larger. Against this background, the European Commission proposal for an EU-wide TGC system is discussed. It is found that such a system is likely to be less effective and less efficient than maintaining national FiT systems, and that it also risks time-consuming legal processes during which investor uncertainties would risk a marked slow-down in investments. Given the underlying objective of addressing security, climate change and competitiveness, it therefore appears that, at least for the time being, continued reliance on national systems, especially FiT would be preferred.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 11 (November)
    Pages: 4079-4092

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:11:p:4079-4092

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    Web page: http://www.elsevier.com/locate/enpol

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    Keywords: Europe Renewables Energy;

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    Cited by:
    1. Francisco Munoz & Enzo Sauma & Benjamin Hobbs, 2013. "Approximations in power transmission planning: implications for the cost and performance of renewable portfolio standards," Journal of Regulatory Economics, Springer, vol. 43(3), pages 305-338, June.
    2. Maria Kopsakangas-Savolainen & Rauli Svento, 2013. "Promotion of Market Access for Renewable Energy in the Nordic Power Markets," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 54(4), pages 549-569, April.
    3. Narbel, Patrick A., 2014. "Rethinking how to support intermittent renewables," Discussion Papers 2014/17, Department of Business and Management Science, Norwegian School of Economics.
    4. Martin, Nigel & Rice, John, 2013. "The solar photovoltaic feed-in tariff scheme in New South Wales, Australia," Energy Policy, Elsevier, vol. 61(C), pages 697-706.
    5. Bergek, Anna & Jacobsson, Staffan, 2010. "Are tradable green certificates a cost-efficient policy driving technical change or a rent-generating machine? Lessons from Sweden 2003-2008," Energy Policy, Elsevier, vol. 38(3), pages 1255-1271, March.
    6. Stokes, Leah C., 2013. "The politics of renewable energy policies: The case of feed-in tariffs in Ontario, Canada," Energy Policy, Elsevier, vol. 56(C), pages 490-500.
    7. A. Denny Ellerman, 2014. "The Implicit Carbon Price of Renewable Energy. Incentives in Germany," EUI-RSCAS Working Papers p0376, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    8. Jegen, Maya & Audet, Gabriel, 2011. "Advocacy coalitions and wind power development: Insights from Quebec," Energy Policy, Elsevier, vol. 39(11), pages 7439-7447.
    9. Natalia Kulichenko & Jens Wirth, 2012. "Concentrating Solar Power in Developing Countries : Regulatory and Financial Incentives for Scaling Up," World Bank Publications, The World Bank, number 9382, July.
    10. Gurkan, G. & Langestraat, R., 2013. "Modeling And Analysis Of Renewable Energy Obligations And Technology Bandings In the UK Electricity Market," Discussion Paper 2013-016, Tilburg University, Center for Economic Research.
    11. Purohit, Ishan & Purohit, Pallav & Shekhar, Shashaank, 2013. "Evaluating the potential of concentrating solar power generation in Northwestern India," Energy Policy, Elsevier, vol. 62(C), pages 157-175.
    12. Kažukauskas, Andrius & Jaraite, Jurate, 2011. "The Profitability of Power Generating Firms and Policies Promoting Renewable Energy," CERE Working Papers 2011:14, CERE - the Center for Environmental and Resource Economics.
    13. Huang, Yun-Hsun & Wu, Jung-Hua, 2011. "Assessment of the feed-in tariff mechanism for renewable energies in Taiwan," Energy Policy, Elsevier, vol. 39(12), pages 8106-8115.
    14. Jaraitė, Jūratė & Kažukauskas, Andrius, 2013. "The profitability of electricity generating firms and policies promoting renewable energy," Energy Economics, Elsevier, vol. 40(C), pages 858-865.
    15. Paul Lehmann & Felix Creutzig & Melf-Hinrich Ehlers & Nele Friedrichsen & Clemens Heuson & Lion Hirth & Robert Pietzcker, 2012. "Carbon Lock-Out: Advancing Renewable Energy Policy in Europe," Energies, MDPI, Open Access Journal, vol. 5(2), pages 323-354, February.
    16. Couture, Toby & Gagnon, Yves, 2010. "An analysis of feed-in tariff remuneration models: Implications for renewable energy investment," Energy Policy, Elsevier, vol. 38(2), pages 955-965, February.
    17. Kangas, Hanna-Liisa & Lintunen, Jussi & Uusivuori, Jussi, 2009. "The cofiring problem of a power plant under policy regulations," Energy Policy, Elsevier, vol. 37(5), pages 1898-1904, May.
    18. Dusonchet, Luigi & Telaretti, Enrico, 2010. "Economic analysis of different supporting policies for the production of electrical energy by solar photovoltaics in eastern European Union countries," Energy Policy, Elsevier, vol. 38(8), pages 4011-4020, August.
    19. Verbruggen, Aviel & Lauber, Volkmar, 2009. "Basic concepts for designing renewable electricity support aiming at a full-scale transition by 2050," Energy Policy, Elsevier, vol. 37(12), pages 5732-5743, December.
    20. Mäkelä, Matti & Lintunen, Jussi & Kangas, Hanna-Liisa & Uusivuori, Jussi, 2011. "Pellet promotion in the Finnish sawmilling industry: The cost-effectiveness of different policy instruments," Journal of Forest Economics, Elsevier, vol. 17(2), pages 185-196, April.
    21. Gürkan, Gül & Langestraat, Romeo, 2014. "Modeling and analysis of renewable energy obligations and technology bandings in the UK electricity market," Energy Policy, Elsevier, vol. 70(C), pages 85-95.

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