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The efficiency of Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation

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  • Doherty, Ronan
  • O'Malley, Mark

Abstract

Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation has some unusual features making it different from other REFIT schemes around the world. By utilising an annual floor price element the scheme presents an option value to the contract holder, which to date has gone unnoticed or unvalued in the market. By employing an option pricing framework, this paper has quantified for the first time in the public domain the expected costs and value of the Irish REFIT support scheme for wind generation. While the cost of the REFIT scheme to the electricity consumer appears to be lower than the cost of schemes in other countries, significant inefficiencies exist as a result of the structure of the scheme. The Irish REFIT scheme is contrasted with a single Fixed Price support scheme and the analysis suggests that the Fixed Price scheme can provide a similar or greater incentive to the wind sector at half the cost to the end electricity consumer, and may also prove more compatible with consumers desire to reduce inter-year electricity portfolio cost volatility.

Suggested Citation

  • Doherty, Ronan & O'Malley, Mark, 2011. "The efficiency of Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation," Energy Policy, Elsevier, vol. 39(9), pages 4911-4919, September.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:9:p:4911-4919
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    References listed on IDEAS

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    10. Loncar, Dragan & Milovanovic, Ivan & Rakic, Biljana & Radjenovic, Tamara, 2017. "Compound real options valuation of renewable energy projects: The case of a wind farm in Serbia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 354-367.
    11. Farrell, Niall & Devine, Mel T. & Soroudi, Alireza, 2018. "An auction framework to integrate dynamic transmission expansion planning and pay-as-bid wind connection auctions," Applied Energy, Elsevier, vol. 228(C), pages 2462-2477.
    12. Barbosa, Luciana & Ferrão, Paulo & Rodrigues, Artur & Sardinha, Alberto, 2018. "Feed-in tariffs with minimum price guarantees and regulatory uncertainty," Energy Economics, Elsevier, vol. 72(C), pages 517-541.
    13. Foley, A.M. & Ó Gallachóir, B.P. & McKeogh, E.J. & Milborrow, D. & Leahy, P.G., 2013. "Addressing the technical and market challenges to high wind power integration in Ireland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 19(C), pages 692-703.
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