The role of policy driven incentives to attract PPPs in renewable-based energy in developing countries : a cross-country analysis
AbstractThis paper presents new global evidence on the key determinants of public-private partnership investment in electricity generated by renewable energy based on a panel data analysis for 105 developing countries over a period of 16 years from 1993 to 2008. It aims to identify the key factors affecting the private investor's decision to enter renewable-based energy generation, through a probit analysis and the amount of investment sunk in this market segment, based on Heckman's sample selection analysis. One of the key results of the paper is that the market for renewable-based energy is strongly driven by supportive policies. Support policies serve not only to attract the entry of private investors, but also to determine the level of investment. In the latter case, its impact is less significant, suggesting the need over time to revisit the power of the incentive schemes, as well as the implied allocation of risks between the public and private sector to ensure that feed-in tariffs produce the desired amount of investment. In contrast, broader economy-wide governance factors, including control for corruption and degree of political competition, are considered by private investors mainly for taking the decision to enter into renewable-based generation. This reinforces the expectation that private investors seem to be adequately protected against their risks, so that once they have entered the market, they can accommodate the governance environment. Private investors in renewable-based energy also require technical and regulatory certainty about the availability of renewable-ready transmission resources, if they are to finance investments. Private investors entering the market look more at the size of the market rather than the income level, whereas when determining the level of investment they assess both the size and"affordability"level. This raises some concerns on the sustainability of support mechanisms and their financing, particularly when the incremental costs implied by renewable-based generation are passed through to consumers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6120.
Date of creation: 01 Jul 2012
Date of revision:
Energy Production and Transportation; Energy Demand; Emerging Markets; Climate Change Mitigation and Green House Gases; Debt Markets;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-ENE-2012-07-23 (Energy Economics)
- NEP-ENV-2012-07-23 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Moner-Girona, Magda, 2009. "A new tailored scheme for the support of renewable energies in developing countries," Energy Policy, Elsevier, Elsevier, vol. 37(5), pages 2037-2041, May.
- Lipp, Judith, 2007. "Lessons for effective renewable electricity policy from Denmark, Germany and the United Kingdom," Energy Policy, Elsevier, Elsevier, vol. 35(11), pages 5481-5495, November.
- Mitchell, C. & Bauknecht, D. & Connor, P.M., 2006. "Effectiveness through risk reduction: a comparison of the renewable obligation in England and Wales and the feed-in system in Germany," Energy Policy, Elsevier, Elsevier, vol. 34(3), pages 297-305, February.
- Sovacool, Benjamin K., 2009. "The intermittency of wind, solar, and renewable electricity generators: Technical barrier or rhetorical excuse?," Utilities Policy, Elsevier, Elsevier, vol. 17(3-4), pages 288-296, September.
- Lesser, Jonathan A. & Su, Xuejuan, 2008. "Design of an economically efficient feed-in tariff structure for renewable energy development," Energy Policy, Elsevier, Elsevier, vol. 36(3), pages 981-990, March.
- Burtraw, Dallas & Palmer, Karen, 2005.
"Cost-Effectiveness of Renewable Electricity Policies,"
Discussion Papers, Resources For the Future
dp-05-01, Resources For the Future.
- Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, Elsevier, vol. 27(6), pages 873-894, November.
- Menanteau, Philippe & Finon, Dominique & Lamy, Marie-Laure, 2003. "Prices versus quantities: choosing policies for promoting the development of renewable energy," Energy Policy, Elsevier, Elsevier, vol. 31(8), pages 799-812, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.