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Rationales for technology-specific RES support: the impaired Brazilian solar expansion

Author

Listed:
  • Gustavo Andreão
  • Michelle Hallacka
  • Miguel Vazqueza

Abstract

Renewable energy promotion mechanisms have two main dimensions: enhancing project revenue and decreasing costs. Capital costs are one of the most relevant. Brazil is used as case study. Financial tools intertwined with industrial policy were applied: first to successfully promote wind generation, and then for solar photovoltaic (PV). The tools applied for wind were transposed to solar PV. Nevertheless, this has led to important challenges caused by the maladaptation of incentives to the solar PV industry specificities (e.g. high effort of innovation, lower transportation costs, and high importance of soft costs). We show how the use of similar financing support mechanism indistinctly for renewable sources (such as solar and wind) can create actual disincentives. We conclude that the financing mechanism has been fundamental for the viability of renewable energy projects, especially in countries without mature capital markets, where most of the infrastructure has received some sort of government financing support. The design of this mechanism needs to take into account the technological specificities and the national characteristics in order to successfully insert a certain renewable source in a determined country. The framework developed can be applied to other study cases.

Suggested Citation

  • Gustavo Andreão & Michelle Hallacka & Miguel Vazqueza, 2017. "Rationales for technology-specific RES support: the impaired Brazilian solar expansion," IEFE Working Papers 99, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
  • Handle: RePEc:bcu:iefewp:iefewp99
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    Keywords

    Financing; Development Bank; RES-E; Wind; Solar; Mechanism design.;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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