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Subsidies for renewable energies in the presence of learning effects and market power

  • Reichenbach, Johanna
  • Requate, Till

We study the impact of learning by doing, learning spill-overs, and imperfect competition in a model with two types of electricity producers, an oligopolistic sector of polluting fossil-fuel utilities and a competitive fringe of non-polluting generators of electricity from renewable energy sources (RES-E). Furthermore we consider an upstream industry of RES-E equipment producers engaged in learning by doing. We show that a first-best policy requires two instruments, a tax in the fossil-fuel sector and an output subsidy for RES-E equipment producers. We then study second-best-optimal feed-in tariffs that are paid to the generators of RES-E. By means of simulations we calculate the welfare loss of a second-best-optimal feed-in-tariff policy and analyze how market structure impacts on second-best-optimal feed-in tariffs.

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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 2 ()
Pages: 236-254

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Handle: RePEc:eee:resene:v:34:y:2012:i:2:p:236-254
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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