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Assessing the Strength and Effectiveness of Renewable Electricity Feed-in Tariffs in European Union Countries

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  • Felix Groba
  • Joe Indvik
  • Steffen Jenner

Abstract

In the last two decades, feed-in tariffs (FIT) and renewable portfolio standards (RPS) have emerged as two of the most popular policies for supporting renewable electricity (RES-E) generation in the developed world. A few studies have assessed their effectiveness, but most do not account for policy design features and market characteristics that influence policy strength. In this paper, we employ 1992-2008 panel data to conduct the first analysis of the effectiveness of FIT policies in promoting solar photovoltaic (PV) and onshore wind power development in 26 European Union countries. We develop a new indicator for FIT strength that captures variability in tariff size, contract duration, digression rate, electricity price, and electricity generation cost to estimate the resulting return on investment. We then regress this indicator on added RES-E capacity using a fixed effects specification. We find that FIT policies have driven solar PV and onshore wind capacity development in the EU. However, this effect is overstated without controls for country characteristics and may be concealed without accounting for the unique design of each policy. We provide empirical evidence that the interaction of policy design and market dynamics are more important determinants of RES-E development than policy enactment alone.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.390079.de/dp1176.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1176.

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Length: 35 p.
Date of creation: 2011
Date of revision:
Publication status: Published in: Energy Policy 52 (2013), 385-401
Handle: RePEc:diw:diwwpp:dp1176

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Keywords: Renewable energy; Feed-in tariff; Panel data models;

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References

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  1. Lipp, Judith, 2007. "Lessons for effective renewable electricity policy from Denmark, Germany and the United Kingdom," Energy Policy, Elsevier, vol. 35(11), pages 5481-5495, November.
  2. António Marques & José Fuinhas & José Manso, 2011. "A Quantile Approach to Identify Factors Promoting Renewable Energy in European Countries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(3), pages 351-366, July.
  3. Schilling, Melissa A. & Esmundo, Melissa, 2009. "Technology S-curves in renewable energy alternatives: Analysis and implications for industry and government," Energy Policy, Elsevier, vol. 37(5), pages 1767-1781, May.
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  7. Lesser, Jonathan A. & Su, Xuejuan, 2008. "Design of an economically efficient feed-in tariff structure for renewable energy development," Energy Policy, Elsevier, vol. 36(3), pages 981-990, March.
  8. Menz, Fredric C. & Vachon, Stephan, 2006. "The effectiveness of different policy regimes for promoting wind power: Experiences from the states," Energy Policy, Elsevier, vol. 34(14), pages 1786-1796, September.
  9. Haas, R. & Eichhammer, W. & Huber, C. & Langniss, O. & Lorenzoni, A. & Madlener, R. & Menanteau, P. & Morthorst, P. -E. & Martins, A. & Oniszk, A. & Schleich, J. & Smith, A. & Vass, Z. & Verbruggen, A, 2004. "How to promote renewable energy systems successfully and effectively," Energy Policy, Elsevier, vol. 32(6), pages 833-839, April.
  10. 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.
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  15. Carley, Sanya, 2009. "State renewable energy electricity policies: An empirical evaluation of effectiveness," Energy Policy, Elsevier, vol. 37(8), pages 3071-3081, August.
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Cited by:
  1. Connor, Peter & Bürger, Veit & Beurskens, Luuk & Ericsson, Karin & Egger, Christiane, 2013. "Devising renewable heat policy: Overview of support options," Energy Policy, Elsevier, vol. 59(C), pages 3-16.
  2. Kosugi, Takanobu, 2013. "A paradox regarding economic support to deploy renewable energy technologies," Energy Policy, Elsevier, vol. 61(C), pages 1111-1115.
  3. Antonelli, Marco & Desideri, Umberto, 2014. "The doping effect of Italian feed-in tariffs on the PV market," Energy Policy, Elsevier, vol. 67(C), pages 583-594.
  4. Zafirakis, D. & Chalvatzis, K. & Kaldellis, J.K., 2013. "“Socially just” support mechanisms for the promotion of renewable energy sources in Greece," Renewable and Sustainable Energy Reviews, Elsevier, vol. 21(C), pages 478-493.
  5. Sánchez-Braza, Antonio & Pablo-Romero, María del P., 2014. "Evaluation of property tax bonus to promote solar thermal systems in Andalusia (Spain)," Energy Policy, Elsevier, vol. 67(C), pages 832-843.
  6. Gireesh Shrimali & Steffen Jenner & Felix Groba & Gabriel Chan & Joe Indvik, 2012. "Have State Renewable Portfolio Standards Really Worked?: Synthesizing Past Policy Assessments," Discussion Papers of DIW Berlin 1258, DIW Berlin, German Institute for Economic Research.
  7. Felix Groba & Barbara Breitschopf, 2013. "Impact of Renewable Energy Policy and Use on Innovation: A Literature Review," Discussion Papers of DIW Berlin 1318, DIW Berlin, German Institute for Economic Research.

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