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Impacts of renewables obligation with recycling of the buy-out fund

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  • Zhou, Huizhong

Abstract

Tradable green certificate (TGC) or renewables obligation (RO) programs typically include a buy-out option, but only in the UK the buy-out fund is redistributed back to the suppliers who have submitted the certificates. We show that when the buy-out fund is redistributed, the supply of renewable energy responds positively to the market conditions and renewables target. Without it, the buy-out rate is equivalent to a maximum price. However, redistribution of the buy-out fund may induce strategic behavior from producers who have market power. We analyze the impacts of market power and integration on the supply of conventional and renewable energy under the RO program with the buy-out fund recycled, and devise some empirical tests to predict these impacts. Policy implications of this study are discussed with special reference to the new FiT CfD system.

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  • Zhou, Huizhong, 2012. "Impacts of renewables obligation with recycling of the buy-out fund," Energy Policy, Elsevier, vol. 46(C), pages 284-291.
    • Handle: RePEc:eee:enepol:v:46:y:2012:i:c:p:284-291
    DOI: 10.1016/j.enpol.2012.03.061
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    1. Li, Jinke & Liu, Guy & Shao, Jing, 2020. "Understanding the ROC transfer payment in the renewable obligation with the recycling mechanism in the United Kingdom," Energy Economics, Elsevier, vol. 87(C).
    2. Shao, Jing & Li, Jinke & Liu, Guy, 2021. "Vertical integration, recycling mechanism, and disadvantaged independent suppliers in the renewable obligation in the UK," Energy Economics, Elsevier, vol. 94(C).
    3. Stamatios Ntanos & Grigorios Kyriakopoulos & Miltiadis Chalikias & Garyfallos Arabatzis & Michalis Skordoulis & Spyros Galatsidas & Dimitrios Drosos, 2018. "A Social Assessment of the Usage of Renewable Energy Sources and Its Contribution to Life Quality: The Case of an Attica Urban Area in Greece," Sustainability, MDPI, vol. 10(5), pages 1-15, May.

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