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Support Schemes for Renewable Energy: An Economic Analysis

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  • Richard Green
  • Adonis Yatchew

Abstract

We consider leading approaches to the decarbonisation of electricity supply. Price supports through long term contracts, such as feed-in-tariffs have been very effective at eliciting rapid escalation of renewable supply, largely because risks have been transferred away from suppliers and tariffs have been generous. However, countries with the most ambitious programs of this type (Denmark, Germany and Spain) have experienced a noticeable increase in electricity costs. Quota programs, combined with some form of tradable carbon certificates, have typically produced a lesser response with lower impact on consumers. Assured access to grids has also played an important role in expediting growth. Both genres of policy instruments increase global demand for renewable technologies, thereby promoting dynamic efficiency. However, other inefficiencies remain. Feed-in-tariffs place primary onus of technology selection and support on governments and regulators. Limitations on carbon trade reduce effectiveness and increase costs as well. The next generation of instruments would benefit from better locational and temporal price signals.

Suggested Citation

  • Richard Green & Adonis Yatchew, 2012. "Support Schemes for Renewable Energy: An Economic Analysis," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
  • Handle: RePEc:aen:eeepjl:1_2_a06
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    References listed on IDEAS

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    Cited by:

    1. Adrienne M. Ohler, 2015. "Factors affecting the rise of renewable energy in the U.S.: Concern over environmental quality or rising unemployment?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Donald N. Dewees, 2013. "The Economics of Renewable Electricity Policy in Ontario," Working Papers tecipa-478, University of Toronto, Department of Economics.
    3. Lam, J.C.K. & Woo, C.K. & Kahrl, F. & Yu, W.K., 2013. "What moves wind energy development in China? Show me the money!," Applied Energy, Elsevier, pages 423-429.
    4. Narbel, Patrick A., 2014. "Rethinking how to support intermittent renewables," Discussion Papers 2014/17, Norwegian School of Economics, Department of Business and Management Science.
    5. Fais, Birgit & Blesl, Markus & Fahl, Ulrich & Voß, Alfred, 2014. "Comparing different support schemes for renewable electricity in the scope of an energy systems analysis," Applied Energy, Elsevier, pages 479-489.
    6. Gireesh Shrimali, Gabriel Chan, Steffen Jenner, Felix Groba and Joe Indvik, 2015. "Evaluating Renewable Portfolio Standards for In-State Renewable Deployment: Accounting for Policy Heterogeneity," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    7. Woo, C.K. & Ho, T. & Zarnikau, J. & Olson, A. & Jones, R. & Chait, M. & Horowitz, I. & Wang, J., 2014. "Electricity-market price and nuclear power plant shutdown: Evidence from California," Energy Policy, Elsevier, vol. 73(C), pages 234-244.
    8. Woo, C.K. & Moore, J. & Schneiderman, B. & Ho, T. & Olson, A. & Alagappan, L. & Chawla, K. & Toyama, N. & Zarnikau, J., 2016. "Merit-order effects of renewable energy and price divergence in California’s day-ahead and real-time electricity markets," Energy Policy, Elsevier, vol. 92(C), pages 299-312.
    9. Narbel, Patrick A., 2014. "Rethinking how to support intermittent renewables," Energy, Elsevier, vol. 77(C), pages 414-421.
    10. Chi-Keung Woo, Ira Horowitz, Jay Zarnikau, Jack Moore, Brendan Schneiderman, Tony Ho, and Eric Leung, 2016. "What Moves the Ex Post Variable Profit of Natural-Gas-Fired Generation in California?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    11. Sreedharan, P. & Farbes, J. & Cutter, E. & Woo, C.K. & Wang, J., 2016. "Microgrid and renewable generation integration: University of California, San Diego," Applied Energy, Elsevier, pages 709-720.
    12. Woo, C.K. & Sreedharan, P. & Hargreaves, J. & Kahrl, F. & Wang, J. & Horowitz, I., 2014. "A review of electricity product differentiation," Applied Energy, Elsevier, pages 262-272.
    13. Brian Rivard and Adonis Yatchew, 2016. "Integration of Renewables into the Ontario Electricity System," The Energy Journal, International Association for Energy Economics, vol. 0(Bollino-M).
    14. Cerdá, Emilio & del Río, Pablo, 2015. "Different interpretations of the cost-effectiveness of renewable electricity support: Some analytical results," Energy, Elsevier, vol. 90(P1), pages 286-298.
    15. del Río, Pablo & Cerdá, Emilio, 2014. "The policy implications of the different interpretations of the cost-effectiveness of renewable electricity support," Energy Policy, Elsevier, vol. 64(C), pages 364-372.
    16. repec:eee:appene:v:204:y:2017:i:c:p:531-543 is not listed on IDEAS

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    JEL classification:

    • F0 - International Economics - - General

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