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Retail price effects of feed-in tariff regulation

Author

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  • Maria Teresa Costa

    () (Universitat de Barcelona & IEB)

  • Elisa Trujillo-Baute

    () (Universitat de Barcelona & IEB)

Abstract

The feed-in tariff regulation is the wider spread promotion scheme used to encourage the take-up and development of generation from renewable energy sources in the EU, and the costs of resources devoted to this promotion are usually borne by final consumers. Two components of the electricity retail price are expected to be influenced by feed-in tariff regulation: the incentive to those firms producing electricity from renewable energy sources and the wholesale price of electricity. In this study we analyze the effects that feed-in tariff regulation has on electricity retail price for industrial consumers. This analysis is performed by estimating the relative intensity of the effects from the cost of incentives for electricity generation under the feed-in tariff and the electricity wholesale price over the Spanish industrial retail price. Especial attention is devoted to technology-specific considerations, as well as short and long run effects. In general, results show that there is not a strong link between the retail and wholesale market for Spanish industrial consumers. Moreover, taking into account technology-specific characteristics, results indicates that an increase of solar generation leads to a higher increase in the industrial retail price than in the case of a proportional increase of wind generation. This implies that, when evaluating the feed-in tariff regulation impact on the industrial retail price, the cost of incentives effect prevails over the wholesale price effect, and this is stronger for solar than for wind generation.

Suggested Citation

  • Maria Teresa Costa & Elisa Trujillo-Baute, 2014. "Retail price effects of feed-in tariff regulation," Working Papers 2014/29, Institut d'Economia de Barcelona (IEB).
  • Handle: RePEc:ieb:wpaper:doc2014-29
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    References listed on IDEAS

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    Cited by:

    1. Batalla-Bejerano, Joan & Trujillo-Baute, Elisa, 2016. "Impacts of intermittent renewable generation on electricity system costs," Energy Policy, Elsevier, vol. 94(C), pages 411-420.
    2. Di Cosmo, Valeria & Malaguzzi Valeri, Laura, 2018. "Wind, storage, interconnection and the cost of electricity generation," Energy Economics, Elsevier, vol. 69(C), pages 1-18.
    3. Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da, 2019. "The “Merit-order effect” of wind and solar power: Volatility and determinants," Renewable and Sustainable Energy Reviews, Elsevier, vol. 102(C), pages 54-62.
    4. Mehtap Kilic & Elisa Trujillo-Baute, 2014. "The stabilizing effect of hydro reservoir levels on intraday power prices under wind forecast errors," Working Papers 2014/30, Institut d'Economia de Barcelona (IEB).
    5. Acar, Berkan & Selcuk, Orhun & Dastan, Seyit Ali, 2019. "The merit order effect of wind and river type hydroelectricity generation on Turkish electricity prices," Energy Policy, Elsevier, vol. 132(C), pages 1298-1319.
    6. Trujillo-Baute, Elisa & del Río, Pablo & Mir-Artigues, Pere, 2018. "Analysing the impact of renewable energy regulation on retail electricity prices," Energy Policy, Elsevier, vol. 114(C), pages 153-164.
    7. Kaller, Alexander & Bielen, Samantha & Marneffe, Wim, 2018. "The impact of regulatory quality and corruption on residential electricity prices in the context of electricity market reforms," Energy Policy, Elsevier, vol. 123(C), pages 514-524.

    More about this item

    Keywords

    Electricity prices; feed-in-tariff; retail market; wholesale market;

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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