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The structural impact of renewable portfolio standards and feed-in tariffs on electricity markets

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  • Ritzenhofen, Ingmar
  • Birge, John R.
  • Spinler, Stefan

Abstract

The capacity of renewable energy sources (RES) has grown rapidly worldwide, and this growth has benefited from such support schemes as renewable portfolio standards (RPS), feed-in tariffs (FITs), and market premia (MP). Previous research concentrated on comparing the effectiveness of these policy instruments at driving RES investment, but the field’s focus has shifted toward evaluating how they structurally affect electricity markets. In particular, research has sought to assess how much RES support schemes contribute to achieving the three main objectives of electricity policy, the affordability, reliability, and sustainability of electricity supply. In this work, we quantitatively compare RPS, FIT, and MP schemes in terms of those criteria by simulating the impact of all three support schemes via a dynamic long-term capacity investment model. We find that each support scheme increases RES penetration and thereby reduces carbon dioxide (CO2) emissions. Whereas MP and FITs can achieve this outcome at lower cost, RPS delivers more robust results.

Suggested Citation

  • Ritzenhofen, Ingmar & Birge, John R. & Spinler, Stefan, 2016. "The structural impact of renewable portfolio standards and feed-in tariffs on electricity markets," European Journal of Operational Research, Elsevier, vol. 255(1), pages 224-242.
    • Handle: RePEc:eee:ejores:v:255:y:2016:i:1:p:224-242
    DOI: 10.1016/j.ejor.2016.04.061
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