Advanced mechanisms for the promotion of renewable energy—Models for the future evolution of the German Renewable Energy Act

The German Renewable Energy Act (EEG) has been very successful in promoting the deployment of renewable electricity technologies in Germany. The increasing share of EEG power in the generation portfolio, increasing amounts of fluctuating power generation, and the growing European integration of power markets governed by competition calls for a re-design of the EEG. In particular, a more efficient system integration and commercial integration of the EEG power is needed to, e.g. better matching feed-in to demand and avoiding stress on electricity grids. This article describes three different options to improve the EEG by providing appropriate incentives and more flexibility to the promotion mechanism and the quantitative compensation scheme without jeopardising the fast deployment of renewable energy technologies. In the “Retailer Model”, it becomes the responsibility of the end-use retailers to adapt the EEG power to the actual demand of their respective customers. The “Market Mediator Model” establishes an independent market mediator responsible to market the renewable electricity. This model is the primary choice when new market entrants are regarded as crucial for the better integration of renewable energy and enhanced competition. The “Optional Bonus Model” relies more on functioning markets since power plant operators can alternatively choose to market the generated electricity themselves with a premium on top of the market price instead of a fixed price.     

Green certificate markets,the risk of over-investment,and the role of long-term contracts

Several papers have recently analyzed the theory and implementation of renewable energy support schemes. The case for a renewable electricity standard (RES) in tandem with a tradeable green certificate (TGC) market has been largely based on efficiency considerations. Case study evidence is inconclusive, in part due to the short track record, but is not generally favorable. Here we reconsider the efficiency case, both static and dynamic, in light of special characteristics of renewable energy projects. We find that when exclusively high fixed-cost technologies comprise the eligible technology pool, the equilibrium form of contracting obviates the principal efficiency advantages claimed for certificate markets. When low fixed-cost technologies compete alongside high fixed-cost technologies in the certificate market, we show that it is likely that long-term contracts will disappear, and the technological choice will be inefficiently shifted away from the high fixed-cost technology. We consider evidence from three well-developed certificate schemes—in Britain, Sweden, and Texas—and find that it is broadly consistent with the theory here.     

Cornerstones of a renewable energy law for emerging markets in South America

Since 1990, effective support schemes for renewable energies have been introduced mainly in European countries. In this article, the authors explain which consequences different general conditions could have on the design and functioning of feed-in laws. Cornerstones for an adjusted feed-in law to the particular general conditions of emerging and developing countries in South America will be drawn, which should give support to the decision-makers for designing an attuned and well-functioning feed-in legislation.     

The policy perspective for RES development in the new member states of the EU

The energy sector of the European Union (EU) is based mainly on fossil fuels and almost two-thirds of the energy demand is imported. In the future, fossil fuels are expected to strengthen their participation in the European energy balance and imports will amount to 70% of overall energy needs. On the other hand, the development of Renewable Energy Sources (RES) is a central aim of the European Commission's energy policy. RES hold a significant share in the 10 new countries recently joined the EU and the adoption of RES-related policies is of imperative importance for the joint cooperation of the new member states with the EU. This paper includes a review of RES status, related policies and prospects in each of the 10-new member states of EU.     

Renewable energy policy in Turkey with the new legal regulations

Since the energy crises in the 1970’s, public and private decision makers are considering how to achieve a sustainable transition from fossil fuel based energy to sustainable and clean energies - namely renewable energies. Combined with the improvement of energy efficiency and the rational use of energy, renewable energy can provide everything fossil fuels currently offer in terms of heating and cooling, electricity generation and transportation. Renewable energy technologies posses many long term benefits including energy security, job creation, business opportunities, sustainable development and prevention of global warming.Turkey’s population is growing at an annual rate of 1.04%. If Turkey uses only traditional energy sources, it simply will not have enough energy capacity for its population. Renewable energy sources have the potential to make a large contribution to Turkey’s sustainable and independent energy future.Turkey aims to utilize its energy potential, including from renewable sources in a cost-effective manner. Turkey targets the share of renewable resources in electricity generation to be at least 30% by 2023 has in its 2009 Electricity Market and Security of Supply Strategy. Positive achievements have been obtained in renewable energy development and manufacturing in Turkey over the past decade. The renewable energy related legislation has been intensified. To meet its 30% target, the current promotion mechanism for renewable sources of electricity relies on feed-in tariffs for different renewable energy sources. Large hydropower is already competitive to conventional fossil-based electricity, so feed-in tariffs in the new RE Law are set to facilitate expanding the deployment of other, less mature renewable energy technologies.     

Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain

It is sometimes argued that renewables are “expensive”. However, although it is generally true that the private costs of renewable electricity generation are certainly above those of conventional electricity, that statement fails to consider the social benefits provided by electricity from renewable energy sources (RES-E), including environmental and socioeconomic ones. This paper empirically analyses an additional albeit usually neglected benefit: the reduction in the wholesale price of electricity as a result of more RES-E generation being fed into the grid. The case of wind generation in Spain shows that this reduction is greater than the increase in the costs for the consumers arising from the RES-E support scheme (the feed-in tariffs), which are charged to the final consumer. Therefore, a net reduction in the retail electricity price results, which is positive from a consumer point of view. This provides an additional argument for RES-E support and contradicts one of the usual arguments against RES-E deployment: the excessive burden on the consumer.     

Green energy market development in Germany: effective public policy and emerging customer demand

This paper reviews the development of renewable energy in Germany from 1973 to 2003. It investigates the relative importance of energy policy and green power marketing in shaping the renewable energy market. More than a decade of consistent policy support for renewables under the feed-in law (StrEG) and its successor (EEG) has been an important driver for increasing renewable electricity generation to date, putting the country in a better position than most of its peers when it comes to achieving European Union targets for renewable energy. Green power marketing driven by customer demand, on the other hand, is growing, but has had limited measurable impact so far. We discuss potential intangible benefits of green power marketing and scenarios for future market development. The paper concludes with lessons that can be learned from the German case for policy design and market development in other countries.     

Fixed feed-in tariff versus premium: A review of the current Spanish system

Since 1998 the Spanish Government established a feed-in system where RES-E generators could choose between two alternatives: fixed feed-in tariff and premium. Nowadays, all RES-E¹ can be sold in the electricity market (getting an additional premium) except for solar photovoltaic. One important novelty established in 2007 is a cap and floor system for facilities under the premium option. The aim of this paper is to analyze and compare these two alternative options, fixed-FIT and premiums, which coexist at the same time in Spain, describe the evolution of both systems and evaluate its performance. The introduction of this support system in Spain led to very good results in terms of RES-E deployment. The main advantage of the premium option is that it is a scheme integrated in the electricity market. One disadvantage is that it can occasionally lead to overcompensation; one way to try to avoid it is to set a cap value. In order to evaluate the performance of this dual support system not only RES-E deployment has been assessed but also the policy stability, the adequacy of RES-E production to the electricity demand pattern and the changes in the investors’ behaviour.     

The efficiency of Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation

Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation has some unusual features making it different from other REFIT schemes around the world. By utilising an annual floor price element the scheme presents an option value to the contract holder, which to date has gone unnoticed or unvalued in the market. By employing an option pricing framework, this paper has quantified for the first time in the public domain the expected costs and value of the Irish REFIT support scheme for wind generation. While the cost of the REFIT scheme to the electricity consumer appears to be lower than the cost of schemes in other countries, significant inefficiencies exist as a result of the structure of the scheme. The Irish REFIT scheme is contrasted with a single Fixed Price support scheme and the analysis suggests that the Fixed Price scheme can provide a similar or greater incentive to the wind sector at half the cost to the end electricity consumer, and may also prove more compatible with consumers desire to reduce inter-year electricity portfolio cost volatility.     

An analysis of feed-in tariff remuneration models: Implications for renewable energy investment

Recent experience from around the world suggests that feed-in tariffs (FITs) are the most effective policy to encourage the rapid and sustained deployment of renewable energy. There are several different ways to structure a FIT policy, each with its own strengths and weaknesses. This paper presents an overview of seven different ways to structure the remuneration of a FIT policy, divided into two broad categories: those in which remuneration is dependent on the electricity price, and those that remain independent from it. This paper examines the advantages and disadvantages of these different FIT models, and concludes with an analysis of these design options, with a focus on their implications both for investors and for society.     

Renewable electricity policies in The Netherlands

Many analysts agree that the support system for renewable electricity (RE) in the Netherlands has been opaque, confusing and lacking long-term security, due to the numerous instruments and to the several changes in the details of the policies. However, most analysts fail to notice that these factors per se are hardly responsible for the uncertainty observed in the Dutch market. This paper surveys the policies introduced in the last decade or so and discusses their effectiveness in facilitating the diffusion of RE. Although the government brought about a remarkable increase in demand for RE, the creation of domestic supply has lagged behind. This relatively slack expansion can be ascribed to the uncertainty in the Dutch framework, caused by the lack of a clear relation between policies stimulating demand and supply for RE. This also hindered the development of national industry and delayed the debate on the removal of planning and administrative bottlenecks.     

Electricity produced from renewable energy sources—What target are we aiming for?

In 2001, the European Commission (hereafter “EC”) formulated an ambitious target of 21% of total community electricity consumption to be generated with renewable energy sources by 2010. Moreover, national indicative targets per Member State were specified. In practice, the latter are implemented in all Member States as national production targets, achievable exclusively through an increase of the domestic production of electricity produced from renewable energy sources (hereafter “RES-E”). However, in this article it will be shown that this is not in line with the EC's intent. Looking at the legislative process resulting in the Directive on the promotion of RES-E, it is demonstrated that instead the EC aimed for European trade in renewable electricity through national consumption targets.     

The expansion of electricity generation from renewable energies in Germany: A review based on the Renewable Energy Sources Act Progress Report 2007 and the new German feed-in legislation

The expansion of electricity generation from renewable sources in Germany is promoted by the Erneuerbare-Energien-Gesetz (EEG), which was last amended in June 2008. In a review of the EEG the political parameters, the progress achieved, and the impacts of the Act itself are set out. This Progress Report addresses cross-sectoral aspects, notably CO₂ emissions reduction, job creation, investment and turnover in the renewables industry, and that industry's prospects for the future. Trends in the individual renewables sectors are described and policy recommendations formulated, as appropriate, on this basis. The policy recommendations have been incorporated into the new EEG from 6 June 2008.     

An evaluation of the installation of solar photovoltaic in residential houses in Malaysia: Past,present, and future

This paper examines solar energy development in Malaysia, particularly in relation to the installation of solar Photovoltaic (PV) in residential houses. It analyzes the past activities related to solar energy in Malaysia, in terms of research and developments (R&Ds), the implementations used as well as the national policies for the past 20 years which have pushed the installation of PV in the country. The Feed-In Tariff (FiT) scheme is discussed, showing comparative cost-benefit analysis between the PV installation in houses in the United Kingdom (UK) and Malaysia, and with other investment schemes available in Malaysia. To investigate the awareness of renewable energy policies and incentives, a preliminary survey of the public opinion in Malaysia has been carried out, and an evaluation of public willingness to invest in the FiT scheme by installing the PV on their houses is presented. The cost-benefit analysis shows that the proposed FiT programme is capable of generating good return on investment as compared to the one in the UK, but the return is lower than other investment tools. The survey suggests that most Malaysians are unaware of the government’s incentives and policies towards renewable energies, and are not willing to invest in the FiT scheme.     

The political economy of international green certificate markets

This paper analyzes the political economy of establishing bilateral trade in green certificate markets as one step towards harmonization of European green electricity support systems. We outline some of the economic principles of an integrated bilateral green certificates market, and then discuss a number of issues that are deemed to be critical for the effectiveness, stability and legitimacy of such a market. By drawing on some of the lessons of the fairly recent intentions to integrate a future green certificate market in Norway with the existing Swedish one, we highlight, exemplify and discuss some critical policy implementation and design issues. These include, for instance, the system's connection to climate policy targets, the role of other support schemes and the definition of what green electricity technologies should be included. Furthermore, the establishment of an international market presumes that the benefits of renewable power (e.g., its impacts on the environment, diversification of the power mix, self-sufficiency, etc.) are approached and valued from an international perspective rather than from a national one, thus implying lesser emphasis on, for instance, employment and regional development impacts. A bilateral green certificate system thus faces a number of important policy challenges, but at the same time it could provide important institutional learning effects that can be useful for future attempts aiming at achieving greater policy integration in the European renewable energy sector.     

Analysis of CSP plants for the definition of energy policies: The influence on electricity cost of solar multiples,capacity factors and energy storage

The effect on the cost of electricity from concentrating solar power (CSP) plants of the solar multiple, the capacity factor and the storage capacity is studied. The interplay among these factors can be used to search for a minimal-cost objective that can serve as a technical criterion to guide in the design of economic incentives for CSP plants. The probability-density function of irradiation is used in conjunction with screening models to evaluate the performance characteristics and costs of concentrating solar power plants. Two technologies have been analyzed in this study: parabolic-trough and tower plants. The results provide information to define the optimal operational range as a function of the desired objective. Thus, it is possible to derive a technical criterion for the design of CSP plants which optimizes the solar electricity produced and its generation cost. The methodology is applied to Spain, and the analysis of the results shows that a solar energy production of 37 kWh/m²/year for tower plants and 66 kWh/m²/year for parabolic-trough ones define the approximate optimal working conditions for the mean DNI in Spain.