Harmonization of renewable electricity feed-in laws in the European Union

This paper focuses on the harmonization of feed-in laws in the European Union as a support mechanism for the promotion of renewable electricity. In particular, it proposes a methodology for harmonization based on a feed-in law with a modular and transparent premium for renewable electricity producers. This premium considers technology costs, some grid services, political incentives and national priorities. The proposed approach includes flexibility mechanisms to update and revise premiums, to avoid windfall profits for producers, and to share technology innovation benefits with electricity consumers while maintaining incentives for innovation. Our approach is based on the review of the main features of the German and Spanish feed-in laws, and takes into account other necessary considerations for harmonization, such as grid access, funding, definitions and standards, ownership of rights derived from renewables, and exceptions for small non-commercial producers and energy-intensive industries.     

Fostering the use of renewable energies in the European Union: the race between feed-in tariffs and green certificates

Fostering the use of renewable energies for power generation is at the heart of the EU's long term energy policy. Accordingly, the European Commission and literally all member states have set up ambitious installations targets for alternative energy sources. These aims can only be reached by recurring to support systems that help covering the cost disadvantages faced on liberalised electricity markets. Currently, a dichotomy of support models exists: Feed-in tariffs on the one side and green certificates on the other side seem promising tools to foster renewable energies. In this contribution we look closely at the concepts of both models as well as their advantages and disadvantages in terms of ecological effectiveness and economic efficiency. It becomes obvious that in the context of the liberalised power markets and the rush for the harmonisation of the instruments it will depend very much on in-detail regulations whether the installation targets will be met-regardless of the basic choice of model.     

Harmonization of renewable electricity feed-in laws: A comment

This comment aims at critically analyzing some of the economic efficiency issues that are raised in the paper by Muñoz et al. [2007. Harmonization of renewable electricity feed-in laws in the European Union. Energy Policy 35, 3104–3114] on the harmonization of feed-in law schemes for renewable electricity in the European Union. We comment on the choice between green certificate systems and feed-in laws, but pay particular attention to the implementation and design of a harmonized feed-in law scheme. In the comment we argue first that the approach suggested by Muñoz et al. tends to downplay many of the practical difficulties in assessing the real costs facing investors in renewable electricity, not the least since the presence of regulatory uncertainty about the marginal costs of renewable electricity may be essential for the choice between different support systems. Concerning the benefit side of renewable electricity promotion, the Muñoz et al. (2007) paper builds on an interpretation of the EU Renewables Directive that provides plenty of room for national priorities and that therefore essentially implies that harmonized support premiums per se are of little value. We argue instead that a harmonized system should primarily address the international spillover effects from renewable electricity promotion, not the least those related to improved security of supply in Europe. There exists then a strong case for disregarding the specific national benefits of renewable electricity production in the design of harmonized support systems, and for instead considering international—perhaps at the start bilateral—policy support coordination based on entirely uniform support levels.     

Analysing the effectiveness of renewable energy supporting policies in the European Union

With several mid-term policies in place to support the development of renewables, the European Union (EU) seems on its way to increasing the share of renewable energy to the targeted 12% by the year 2010. It is however, yet unclear how effective these policies are, which technologies will see the largest growth and which countries will indeed be able to meet their targets. This article discusses a monitoring protocol that was developed to monitor this effectiveness and judge whether targets will be met. In a step-wise approach policy instruments are characterised and analysed, leading to a quantitative assessment of the likely growth in renewable energy production for each individual technology and country in case no policy changes occur. Applying this monitoring protocol at the EU-level we show that with the current policies in place renewable energy production will reach a share of 8–10% in 2010, and the share of electricity production will reach a level of 15–18% of total electricity consumption, whereas the target is 22.5%. Additional policies are clearly needed to achieve the ambitious targets set.     

Support schemes for renewable electricity in the European Union: Producer strategies and competition

Current discussion about how to reform European support schemes for renewable electricity neglects certain risks of market power in wholesale electricity markets. In a stylized Cournot model of interacting spot and forward electricity markets, I analyze how different price-based support schemes affect producer strategies and, ultimately, competition in the wholesale market. I compare the strategic behavior of renewable and conventional producers in terms of electricity production and forward market sales in the presence of two different price-based support schemes: feed-in tariffs and feed-in premiums. I show that the feed-in premium, which is the European Commission's current scheme of choice, may enhance market power and favor conventional electricity production. It may also reduce the likelihood of achieving the political objective to increase production from renewable energy sources.     

An economic valuation of renewable electricity promoted by feed-in system in Spain

This paper provides an economic valuation of RES-E promoted by the Spanish feed-in system. First, supported RES-E is evaluated in terms of CO₂ emissions avoided when they are introduced in the Spanish electricity market instead of other potential polluting energy sources. And secondly, these positive environmental externalities of supported RES-E are compared with the funds they received from the Spanish feed-in system, in order to estimate the economic balance of this support system. The estimate for 2011 shows that approximately 10% of premiums paid to promote RES-E could be explained, from an economic point of view, by the monetary value of CO₂ emissions avoided by not using alternative energy sources, as coal and combined cycle. Furthermore, the economic evaluation of National Energy Commission (CNE [Spanish acronym]) proposal that links the energy sources responsible for CO₂ emissions to finance the support system of RES-E, confirms that the monetary value of CO₂ emissions avoided when using promoted RES-E is nearly 70% of the revenues from the sale of allowances allocated to polluting technologies in the last National Plan of Emission Allowances in 2011. Promotion of RES-E over the use of fossil energy sources, must take into account not only the costs of their implementation, but also the overall balance of their use.     

对可再生能源发电实行长期保护性电价制度的问题

针对德国实行的对可再生能源发电上网实施长期保护性电价制度的实践进行了分析，介绍了德国实行购电法的经验和问题。对我国可再生能源发电上网实行长期保护性电价制度的设计和实施提出一些建议。     

Potential of solar electricity generation in the European Union member states and candidate countries

During the years 2001–2005, a European solar radiation database was developed using a solar radiation model and climatic data integrated within the Photovoltaic Geographic Information System (PVGIS). The database, with a resolution of 1 km × 1 km, consists of monthly and yearly averages of global irradiation and related climatic parameters, representing the period 1981–1990. The database has been used to analyse regional and national differences of solar energy resource and to assess the photovoltaic (PV) potential in the 25 European Union member states and 5 candidate countries. The calculation of electricity generation potential by contemporary PV technology is a basic step in analysing scenarios for the future energy supply and for a rational implementation of legal and financial frameworks to support the developing industrial production of PV. Three aspects are explored within this paper: (1) the expected average annual electricity generation of a ‘standard’ 1 kW_p grid-connected PV system; (2) the theoretical potential of PV electricity generation; (3) determination of required installed capacity for each country to supply 1% of the national electricity consumption from PV. The analysis shows that PV can already provide a significant contribution to a mixed renewable energy portfolio in the present and future European Union.     

Solar feed-in tariffs and the merit order effect: A study of the German electricity market

This study investigates the merit order effect (MOE) of the recent years' implementation of solar power in Germany. Market clearing electricity prices and production levels are compared for the years 2009–2011, and a model for the relationship between the electricity price and price sensitive electricity production is developed and applied to predict electricity prices in Germany from July 2010 to July 2011 with and without solar electricity generation (SEG). The results show that the SEG has caused a 7% reduction in average electricity prices for this period. The average daily maximum price and daily price variation are also found to decrease, by 13% and 23%, respectively. When taking the MOE into account the net consumer's cost of the solar feed-in tariff (FIT) system is found to be 23% less than the charge listed in the electricity bill. The German FIT policy for solar power has been subject to considerable public debate, and a common argument brought up in disfavor of the system is the high cost for the consumers. In this study we demonstrate the importance of including the MOE when evaluating the total costs and benefits of the FIT policy mechanism.     

The politics of renewable energy policies: The case of feed-in tariffs in Ontario,Canada

Designing and implementing a renewable energy policy involves political decisions and actors. Yet most research on renewable energy policies comparatively evaluates instruments from an economic or technical perspective. This paper presents a case study of Ontario’s feed-in tariff policies between 1997 and 2012 to analyze how the political process affects renewable energy policy design and implementation. Ontario’s policy, although initially successful, has met with increasing resistance over time. The case reveals key political tensions that arise during implementation. First, high-level support for a policy does not necessarily translate into widespread public support, particularly for local deployment. Second, the government often struggles under asymmetric information during price setting, which may weaken the policy’s legitimacy with the public due to higher costs. Third, there is an unacknowledged tension that governments must navigate between policy stability, to spur investment, and adaptive policymaking, to improve policy design. Fourth, when multiple jurisdictions pursue the same policies simultaneously, international political conflict over jobs and innovation may occur. These implementation tensions result from political choices during policy design and present underappreciated challenges to transforming the electricity system. Governments need to critically recognize the political dimension of renewable energy policies to secure sustained political support.     

Risk-based assessment of the cost-efficiency and the effectivity of renewable energy support schemes: Certificate markets versus feed-in tariffs

The introduction of renewable energy sources in the electricity generation mix has the potential to reduce power sector's emissions and countries' dependence on imported oil. Climate change concerns and highly volatile oil prices have attracted governments' interest and support to sustain investments in renewable energy capacity, and different support policies have been implemented in many countries around the world. This paper analyzes the effects of investors' risk aversion on the performance of support schemes. The analysis compares two policy options, a feed-in tariff mechanism with a certificate market system. Results show that while a tariff mechanism could obtain better results than a certificate market, its performance is strictly dependent on regulator choices. A certificate market instead, permits to obtain the desired level of renewable energy market share with good cost-efficiency as long as investors' risk aversion is moderate. Moreover, discounting future cash flows with higher social discount rates further benefits a certificate system making it preferable to feed-in tariffs.     

Hybrid modeling to support energy-climate policy: Effects of feed-in tariffs to promote renewable energy in Portugal

Feed-in tariffs have been the main policy instrument applied in Portugal for the promotion of electricity produced from renewable energy sources under the EU Directives on energy and climate regulation. In this paper, we provide an empirical impact assessment of the economic and environmental effects of Portugal's FITs policy to promote RES-E generation. Impact assessment of policy instruments plays a crucial role on decision-making process. For numerical simulations, we make use of a hybrid top-down/bottom-up general equilibrium modeling approach, which represents a reliable tool to analyze the complex interactions between economic, energy, and environmental issues related to energy policies.Numerical simulations confirm the empirical evidence that the FITs policy implemented by Portugal was both an effective and a cost-efficient way to increase the generation of electricity from renewable energy sources and thus to achieve the national RES-E target of 45% in 2010. Results show relatively modest macroeconomic impacts indicating potentially low economic adjustment costs. From an environmental perspective, the deployment of renewable energy source results in significant carbon emissions reductions.     

Heterogeneous effects of regulation on the efficiency of the electricity industry across European Union countries

This paper focuses on the relationship between the stringency of regulation (OECD indicators) and total factor productivity (TFP) growth in the electricity sectors of 19 European Union countries for the period 1994–2007. Both the OECD regulatory indicator and the TFP growth index have been decomposed in order to bring to light a complex picture of interrelations in which the negative impact of the overall regulation on productivity is the result of opposite forces. Estimation results tell us that only the stringency of entry regulation significantly reduces technological change, whereas vertical integration exhibits a negative and significant impact only on the catching up process (pure efficiency change). Lastly, we found an interesting result concerning the explanatory variables of the scale efficiency change: in this case only public ownership matters, in other terms high levels of public in the structure ownership of electric companies guarantee improvements in reaching the optimal scale of production. These heterogeneous effects are also confirmed when we use a different measure of efficiency, that is, the distance of the actual from the optimal reserve margin.     

Returns on investment in electricity producing photovoltaic systems under de-escalating feed-in tariffs: The case of Greece

Under the threat of ballooning energy bills, the Greek legal framework supporting the electricity producing photovoltaic systems (PVS) changed in January 2009 from a fixed to a de-escalating feed-in tariff schedule. In this paper we investigate the internal rate of return (IRR) on investing in PVS under the new regulatory environment. We find that the new scheme favours strongly the early entry in the market. Unless there is a significant decrease in the equipment cost over the next decade, entering the market from 2015 onwards will be prohibitive. The bias of the current policy design towards early entry in a rapidly developing set of technologies entails the risk of a lock-up with sub-optimal technological option. This outlines the importance for policy design of linking the rate of feed-in-tariff de-escalation to more realistic expectations regarding the technology learning curve.     

Implementing a global fund for feed-in tariffs in developing countries: A case study of Tanzania

Feed-in tariffs are the world’s most prevalent renewable energy policy and have driven approximately 75% of the world’s installed PV capacity and 45% of the world’s wind energy capacity. Although approximately 28 developing countries have enacted national feed-in tariffs, market growth in developing countries has been slow because of a range of technical, regulatory, and financial barriers. This paper uses the Global Energy Transfer Feed-in Tariff (GET FiT) concept to explore potential international support for renewable energy in developing countries. This paper reviews the GET FiT concept and discusses the key mitigation strategies that it proposes to employ. The paper also provides a short case study of how GET FiT might be targeted to support a feed-in tariff policy in a specific developing country, Tanzania.     

Cost and benefit of renewable energy in the European Union

An assessment is made as to whether renewable energy use for electricity generation in the EU was beneficial throughout the cycle of high and low oil prices. Costs and benefits are calculated with the EU statistics for the period of low oil prices 1998–2002 and high oil prices 2003–2009. The share of renewable energy in electricity production was 21% of all energy resources in 2008, growing on average 5% a year during 2003–2008 compared to nil growth of the fossil fuels mix. Correlations show significant impacts of growing renewable energy use on changes in consumers' electricity prices during the high and rapidly increasing fossil fuel prices in the period 2005–2008. The growing use has contributed to price decrease in most countries that use more renewable energy and price increase in many countries that use little renewable energy. Costs and benefits are assessed through comparison between the observed consumers' electricity prices and simulated prices had they followed the costs of fossil fuel mix. A net benefit of 47 billion euro throughout the oil price cycle is attributable to the growing use of renewable energy, which is on average 8 billion euro a year. This net benefit is larger than the total public support for renewable energy. The net benefit would be larger had the EU anticipated high oil prices through more public support during low oil prices, as this would create productive capacity, but countries' interests increasingly differed. An anti-cyclic EU policy is recommended.     

Increasing marginal costs and the efficiency of differentiated feed-in tariffs

We study optimal subsidies for renewable energy (RE) generation to internalize external benefits from inter-temporal learning-by-doing spillovers, taking into account increasing marginal costs at the industry level due to limited availability of sites suitable for RE. We find that the optimal RE subsidy is differentiated according to productivity and derive a condition on production and spillovers under which less efficient, i.e. more costly, technologies should receive higher support, as common in actual policy-making. We show that such a support of technological diversification is optimal if (i) productive sites are scarce, which limits future utilization of knowledge and if (ii) technologies mature rapidly with little further scope for learning. Prima facie evidence for these elasticities for Germany, Denmark and UK suggests that support for technology diversification is the optimal approach for these countries.     

Ten years of renewable electricity policies in Spain: An analysis of successive feed-in tariff reforms

Spain has been one of the most successful countries in the public promotion of electricity from renewable energy sources (RES-E), particularly wind electricity. This support has been based on a feed-in tariff (FIT) scheme. Although the basic structure of the system was implemented in 1998, it has been modified in 2004 and 2007. This paper provides an overview of the last 10 years of RES-E promotion in Spain, focusing on the FIT system and analysing the main differences and improvements of the three FIT systems. A political economy approach, which considers the interactions between key stakeholders in RES-E promotion, is used to interpret the actual outcomes of successive FIT reforms and their main design elements.     

ADMIRE-REBUS: modeling the European market for renewable electricity

ADMIRE REBUS is a dynamic simulation model of the international market for renewable electricity. It pays explicit attention to trade barriers, discriminative support policies, risks, and other imperfections inherent in a market in transition. The model matches national supply curves (based on costs and potentials) with policy-based demand curves so as to take into account the discriminative characteristics of policies, where appropriate, and the ability of producers to choose whether they produce for the domestic market or whether they wish to trade their production. Because of the different levels of national support schemes, different submarkets emerge with local equilibrium prices. The paper describes the way in which the model simulates the policy-induced renewable electricity market, and shows results concerning the contribution of several important technologies in five scenarios that differ with regard to assumed ambition level, trade barriers, and timing of EU member states' policies on renewable electricity. Within the chosen scenarios, the model shows wind offshore to be the most sensitive technology with regard to the policy environment.     

Efficiency and effectiveness of promotion systems for electricity generation from renewable energy sources - Lessons from EU countries

Currently, a wide range of strategies is implemented in different countries to increase the share of electricity from renewable energy sources (RES-E). A still controversial discussion is whether quantity-driven (like Tradable Green Certificates (TGCs) based on quotas) or price-driven (like feed-in-tariffs (FIT)) instruments lead to preferable solutions for society. The core objective of this paper is to compare the perspectives of quota-based certificate trading systems for an efficient and effective increase of RES-E with FIT. The major results of this analysis are: (i) The success stories of growth in RES-E in EU member states in recent years has been triggered by FIT implemented in a technology-specific manner at modest costs for European citizens; (ii) At present, TGC systems in most countries applied show a low effectiveness with respect to RES-E deployment of less mature technologies such as solar PV (with improving tendencies in e.g. the UK or Italy with respect to certain technologies); (iii) Compared to short term trading in TGC markets the intrinsic stability of FIT systems appears to be a key element for success; (iv) Hence, currently a well-designed (dynamic) FIT system provides a certain deployment of RES-E in the shortest time and at lowest costs for society.