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Renewable energy support: Pre-announced policies and efficiency

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  • Neerunjun, Nandeeta
  • Stahn, Hubert

Abstract

This paper is essentially based on the assumption that policies supporting investment in intermittent renewable technologies cannot be contingent on meteorological events causing this intermittence. This decision was taken by most policymakers to avoid overly complex policy prescriptions. But in doing so, the first-best energy mix may be out of reach. We compare, in a unified second-best setting, the feed-in tariff, renewable premiums and tradable green certificates policy. We consider a “two-period, S-state” model. The S states reflect intermittency. Production decisions for renewable electricity are taken prior to the resolution of the uncertainty while the fossil-fuel sector adjusts its decision in each state. Retailers buy electricity on a state-dependent wholesale market which they deliver to consumers according to a fixed-tariff or a real-time-pricing contract. All these elements matter in the efficiency assessment of these policies.

Suggested Citation

  • Neerunjun, Nandeeta & Stahn, Hubert, 2025. "Renewable energy support: Pre-announced policies and efficiency," Energy Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:eneeco:v:150:y:2025:i:c:s0140988325006280
    DOI: 10.1016/j.eneco.2025.108801
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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