Financing investments in renewable energy : the impacts of policy design

The costs of electric power projects utilizing renewable energy technologies (RETs) are highly sensitive to financing terms. Consequently, as the electricity industry is restructured and new renewables policies are created, it is important for policymakers to consider the impacts of renewables policy design on RET financing. This paper reviews the power plant financing process for renewable energy projects, estimates the impact of financing terms on levelized energy costs, and provides insights to policymakers on the important nexus between renewables policy design and financing. We review five case studies of renewable energy policies, and find that one of the key reasons that RET policies are not more effective is that project development and financing processes are frequently ignored or misunderstood when designing and implementing renewable energy policies. The case studies specifically show that policies that do not provide long-term stability or that have negative secondary impacts on investment decisions will increase financing costs, sometimes dramatically reducing the effectiveness of the program. Within U.S. electricity restructuring proceedings, new renewable energy policies are being created, and restructuring itself is changing the way RETs are financed. As these new policies are created and implemented, it is essential that policymakers acknowledge the financing difficulties faced by renewables developers and pay special attention to the impacts of renewables policy design on financing. As shown in this paper, a renewables policy that is carefully designed can reduce renewable energy costs dramatically by providing revenue certainty that will, in turn, reduce financing risk premiums.     

化石能源补贴政策对分布式发电技术投资影响研究

为降低能源密集型产业的能源单耗、降低能源强度,需对能源补贴政策进行优化,在能源补贴政策发生变化后,微电网分布式发电技术投资结构将发生变化。从传统发电与可再生能源分布式发电技术的角度分析了减少化石能源补贴对微电网分布式发电技术投资的影响程度。根据经济、技术及环境指标运用多层次决策(MADM)法对能源补贴减少前后的各种微电网分布式发电技术的效益和成本进行了计算,并与化石能源投资成本进行了对比。算例分析结果表明,削减化石能源补贴可增加微电网分布式发电技术的投资份额,改善环境质量。     

Cooperation mechanisms to achieve EU renewable targets

There are considerable benefits from cooperating among member states on meeting the 2020 renewable energy sources (RES) targets. Today countries are supporting investments in renewable energy by many different types of support schemes and with different levels of support. The EU has opened for cooperation mechanisms such as joint support schemes for promoting renewable energy to meet the 2020 targets. The potential coordination benefits, with more efficient localisation and composition of renewable investment, can be achieved by creating new areas/sub-segments of renewable technologies where support costs are shared and credits are transferred between countries.Countries that are not coordinating support for renewable energy might induce inefficient investment in new capacity that would have been more beneficial elsewhere and still have provided the same contribution to meeting the 2020 RES targets. Furthermore, countries might find themselves competing for investment in a market with limited capital available. In both cases, the cost-efficiency of the renewable support policies is reduced compared to a coordinated solution.Barriers for joint support such as network regulation regarding connection of new capacity to the electricity grid and cost sharing rules for electricity transmission expansion are examined and examples given. The influence of additional renewable capacity on domestic/regional power market prices can be a barrier. The market will be influenced by for example an expansion of the wind capacity resulting in lower prices, which will affect existing conventional producers. This development will be opposed by conventional producers, whereas consumers will support such a strategy.A major barrier is the timing of RES targets and the uncertainty regarding future targets. We illustrate the importance of different assumptions on future targets and the implied value of RES credits. The effect on the credit price for 2020 is presented in an exemplary case study of 200 MW wind capacity.     

Analysis of long-range clean energy investment scenarios for Eritrea,East Africa

We discuss energy efficiency and renewable energy (EE/RE) investments in Eritrea from the strategic long-term economic perspective of meeting Eritrea's sustainable development goals and reducing greenhouse gas emissions. EE/RE are potentially important contributors to national productive capital accumulation, enhancement of the environment, expansion of energy services, increases in household standard of living, and improvements in health. In this study, we develop a spreadsheet model for calculating some of the national benefits and costs of different levels of investment in EE/RE. We then present the results of the model in terms of investment demand and investment scenario curves. These curves express the contribution that efficiency and renewable energy projects can make in terms of reduced energy sector operating expenses, and reduced carbon emissions. We provide demand and supply curves that show the rate of return, the cost of carbon emissions reductions vs. supply, and the evolution of the marginal carbon emissions per dollar of GDP for different investment levels and different fuel-type subsectors.     

Innovative financing models for low carbon transitions: Exploring the case for revolving funds for domestic energy efficiency programmes

The IEA has estimated that over the next four decades US$31 trillion will be required to promote energy efficiency in buildings. However, the opportunities to make such investments are often constrained, particularly in contexts of austerity. We consider the potential of revolving funds as an innovative financing mechanism that could reduce investment requirements and enhance investment impacts by recovering and reinvesting some of the savings generated by early investments. Such funds have been created in various contexts, but there has never been a formal academic evaluation of their potential to contribute to low carbon transitions. To address this, we propose a generic revolving fund model and apply it using data on the costs and benefits of domestic sector retrofit in the UK. We find that a revolving fund could reduce the costs of domestic sector retrofit in the UK by 26%, or £9 billion, whilst also making such a scheme cost-neutral, albeit with significant up-front investments that would only pay for themselves over an extended period of time. We conclude that revolving funds could enable countries with limited resources to invest more heavily and more effectively in low carbon development, even in contexts of austerity.     

The diffusion of renewable electricity in the presence of climate policy and technology learning: The case of Sweden

The overall objective of this paper is to analyze the impact of climate policy and technology learning on future investments in the Swedish power sector. Methodologically we assess the lifetime engineering costs of different power generation technologies in Sweden, and analyze the impact of carbon pricing on the competitive cost position of these technologies under varying rate-of-return requirements. We also argue that technological learning in the Swedish power sector – not the least in the case of wind power – is strongly related to the presence of international learning and R&D spillovers, and for this reason capacity expansions abroad have important influences of the future cost of power generation in Sweden. The results suggest that renewable power will benefit from existing EU climate policy measures, but overall additional policy instruments (e.g., green certificate schemes) are also needed to stimulate the diffusion of renewable power. Moreover, under a recent European Commission scenario and using estimated learning rates for wind power and the combined cycle gas turbine (CCGT), wind power gains considerable competitive ground due to international technology learning impacts. These latter results are, however, very sensitive to the assumed learning-by-doing rates for wind power and CCGT, respectively.     

Who invests in renewable electricity production? Empirical evidence and suggestions for further research

Transforming energy systems to fulfill the needs of a low-carbon economy requires large investments in renewable electricity production (RES-E). Recent literature underlines the need to take a closer look at the composition of the RES-E investor group in order to understand the motives and investment processes of different types of investors. However, existing energy policies generally consider RES-E investments made on a regional or national level, and target investors who evaluate their RES-E investments according to least-cost high-profit criteria. We present empirical evidence to show that RES-E investments are made by a heterogeneous group of investors, that a variety of investors exist and that their formation varies among the different types of renewable sources. This has direct implications for our understanding of the investment process in RES-E and for the study of motives and driving forces of RES-E investors. We introduce a multi-dimensional framework for analyzing differences between categories of investors, which not only considers to the standard economic dimension which is predominant in the contemporary energy literature, but also considers the entrepreneurship, innovation-adoption and institutional dimensions. The framework emphasizes the influence of four main investor-related factors on the investment process which should be studied in future research: motives, background, resources and personal characteristics.     

Integrated assessment of bioelectricity technology options

Power generation from biomass is a sustainable energy technology which can contribute to substantial reductions in greenhouse gas emissions, but with greater potential for environmental, economic and social impacts than most other renewable energy technologies. It is important therefore in assessing bioenergy systems to take account of not only technical, but also environmental, economic and social parameters on a common basis. This work addresses the challenge of analysing, quantifying and comparing these factors for bioenergy power generation systems. A life-cycle approach is used to analyse the technical, environmental, economic and social impacts of entire bioelectricity systems, with a number of life-cycle indicators as outputs to facilitate cross-comparison. The results show that similar greenhouse gas savings are achieved with the wide variety of technologies and scales studied, but land-use efficiency of greenhouse gas savings and specific airborne emissions varied substantially. Also, while specific investment costs and electricity costs vary substantially from one system to another the number of jobs created per unit of electricity delivered remains roughly constant. Recorded views of stakeholders illustrate that diverging priorities exist for different stakeholder groups and this will influence appropriate choice of bioenergy systems for different applications.     

The effect of the feed-in-system policy on renewable energy investments: Evidence from the EU countries

We study the effect of the Feed-in-System (FIS) policy on wind and solar photovoltaic energy investments in the European Union (EU), over the time period between 1992 and 2015, considering the heterogeneity of the policies and market conditions across the EU countries. We develop a FIS subsidy performance indicator that distinguishes feed-in-tariff (FIT) from feed-in-premium (FIP) and considers other important aspects of each of these contracts, such as the duration, tariff price, energy spot price and production costs, as well as the market conditions. We conclude that the mere existence of the FIS policy does not necessarily enhance renewable energy investments, it depends on the type of the FIS contract and its features, and may vary across the different sources of renewable energy. Some of our findings are new to the literature and can have important implications in the development of new public investment incentives to promote renewable energy.     

Internalizing externalities into capacity expansion planning: The case of electricity in Vietnam

This paper examines the impacts of including external costs such as environmental and health damages from power production on power generation expansion planning in Vietnam. Using the MARKAL model and covering a 20-year period to 2025, the study shows that there are substantial changes in the generation structure in favor of renewable energy technologies and other low emitting technologies. These changes lead to a reduction in fossil fuel requirements, and consequently, a reduction of CO₂, NO_x, SO₂, and PM emissions which could be expected to also reduce the associated environmental and human health impacts. The avoided external costs would be equivalent to 4.4 US cent/kWh. However, these gains are not free as the additional electricity production cost would be around 2.6 US cent/kWh higher if the switch to more expensive, but lower emitting technologies were made. The net benefit of internalizing these externalities is thus around 1.8 US cent/kWh.     

Toward the clean production of hydrogen: Competition among renewable energy sources and nuclear power

This study elucidates the competition among renewable and nuclear energy sources for the production of hydrogen. These involve the use of solar, wind, biological process, tidal, geothermal and nuclear power to generate hydrogen. A comprehensive economic model, the Taiwan General Equilibrium Model-Clean Energy (TAIGEM-CE) model, is used for forecasting. Based on certain assumptions, the analytical results reveal that the most promising means of generating hydrogen is using wind power. Geothermal power is the most sensitive to external investment as a source of power for producing hydrogen. Solar hydrogen also benefits greatly from investment. Production of biohydrogen will be favorable without external investment, and they are less sensitive to investment than other renewable energy sources. Based on the assumptions made in this study, nuclear energy is not as competitive as most renewable energy sources for hydrogen production.     

A retrospective analysis of benefits and impacts of U.S. renewable portfolio standards

As states consider revising or developing renewable portfolio standards (RPS), they are evaluating policy costs, benefits, and other impacts. We present the first U. S. national-level assessment of state RPS program benefits and impacts, focusing on new renewable electricity resources used to meet RPS compliance obligations in 2013. In our central-case scenario, reductions in life-cycle greenhouse gas emissions from displaced fossil fuel-generated electricity resulted in $2.2 billion of global benefits. Health and environmental benefits from reductions in criteria air pollutants (sulfur dioxide, nitrogen oxides, and particulate matter 2.5) were even greater, estimated at $5.2 billion in the central case. Further benefits accrued in the form of reductions in water withdrawals and consumption for power generation. Finally, although best considered resource transfers rather than net societal benefits, new renewable electricity generation used for RPS compliance in 2013 also supported nearly 200,000 U. S.-based gross jobs and reduced wholesale electricity prices and natural gas prices, saving consumers a combined $1.3–$4.9 billion. In total, the estimated benefits and impacts well-exceed previous estimates of RPS compliance costs.     

Levelised costs of Wave and Tidal energy in the UK: Cost competitiveness and the importance of “banded” Renewables Obligation Certificates

In this paper, publicly available cost data are used to calculate the private levelised costs of two marine energy technologies for UK electricity generation: Wave and Tidal Stream power. These estimates are compared to those for ten other electricity generation technologies whose costs were identified by the UK Government (DTI, 2006). Under plausible assumptions for costs and performance, point estimates of the levelised costs of Wave and Tidal Stream generation are £190 and £81/MWh, respectively. Sensitivity analysis shows how these relative private levelised costs calculations are affected by variation in key parameters, specifically the assumed capital costs, fuel costs and the discount rate. We also consider the impact of the introduction of technology-differentiated financial support for renewable energy on the cost competitiveness of Wave and Tidal Stream power. Further, we compare the impact of the current UK government support level to the more generous degree of assistance for marine technologies that is proposed by the Scottish government.     

Hydrogen strategy as an energy transition and economic transformation avenue for natural gas exporting countries: Qatar as a case study

In the wake of the apparent impacts of climate change, the world is searching for clean energy transformations and a consequent transition to a carbon-neutral economy and life. The intermittent nature of renewable energy sources introduces several risks, and efficient energy storage technologies are developed to circumvent such issues. However, these storage methods also come with additional costs and uncertainties. Hydrogen is considered a viable option as an energy carrier and storage medium, offering versatility to the energy mix. This study reviews hydrogen production, storage, transmission, and applications avenues, describes the current global hydrogen market and compares national hydrogen strategies. A framework for evaluating the relative competitiveness of natural gas-exporting countries as hydrogen exporters is developed. Qatar's national hydrogen strategy should focus on blue and turquoise hydrogen production in the short/medium term with a mix of green hydrogen in the future term and investment in technological research and development to compete with other gas exporters that have abundant renewable energy potential.     

The impact of wind power support schemes on technology choices

In energy systems with large shares of variable renewable energies, electricity generation is lower during unfavorable weather conditions. System-friendly wind turbines (SFTs) rectify this by producing a larger share of their electricity at low wind speeds. This paper analyzes to what extent SFTs' benefits out-weigh their additional costs and how to incentivize investments into them. Using a wind power investment model for Germany, I show that SFTs indeed deliver benefits for the energy system that over-compensate for their cost premium. Floating market premium schemes incentivize their deployment only where investors bear significant price risks and possess sufficient foresight. Alternatively, a new production value-based benchmark triggers investors to install SFTs that meet the requirements of power systems with increasing shares of variable renewable energies.     

Boosting new renewable technologies towards grid parity – Economic and policy aspects

The intensity of market penetration and hence the relevance of clean energy technologies in mitigating climate change will greatly depend on their cost-effectiveness. This paper discusses the economic and policy aspects of speeding up the market of these technologies to reach cost parity. A combination of historical energy market dynamics, technology diffusion and endogenous learning models were employed in the analyses. Starting from giving a preferential position to emerging renewable energy technologies in the energy and climate policy, which also means securing adequate financial resources for their deployment, could lead in the base scenario to a full-cost breakthrough of wind power around 2027 and of photovoltaics in 2032. The combined global market share of renewable electricity in 2050 could reach 62% of all electricity (now 19%) of which wind and solar power alone could account for almost two-thirds corresponding to a carbon saving in the range of 8–16 GtCO₂. However, if the new technologies were downgraded in the energy and climate policy context, the combined impact of solar and wind could remain at no less than 11% which would marginalize these technologies in the fight against climate change. The estimates for financial support to achieve cost parity were very sensitive to the assumptions of the input parameters: in the base case the extra costs or learning investments for solar power were €1432 billion and for wind power €327 billion, but with more conservative input data these values could grow manifold. On the other hand, considering the potentially cheaper electricity from new technologies above the cost parity point and putting a price on carbon could result in a positive yield from public support instead of it being regarded merely as unnecessary spending. The findings stress the necessity of long-term policies and strong commercialization strategies to bring the new energy technologies to breakeven point, but also highlight the complexity of assessing the true costs of making new energy technologies fully competitive.     

The impact of clean energy investments on the Greek economy: An input–output analysis (2010–2020)

The aim of this paper is twofold: first, to calculate the “green” energy investments, by industrial sector, that Greece would need in order to satisfy a number of energy and environmental targets adopted in the context of the European Commission’s energy and climate change package; and second, to calculate the macro-economic impacts of these “green” investments on production and employment in the Greek economy. To this end, the input–output analysis has been exploited for estimating the direct, indirect and induced macroeconomic effects associated with the implementation of selected energy conservation measures, the promotion of renewable energy technologies, etc. Our findings show that the required investments would reach the amount of €47.9 billion, over the period 2010–2020. These investments will result in an average annual increase of the national product by €9.4 billion, creating simultaneously 108,000 full-time equivalent jobs for the entire period under consideration. The employment generated per €1 million investment is relatively higher in energy saving projects in buildings and transport in comparison with the development of RES in power generation sector.     

Multidimensional evaluation of global investments on the renewable energy with the integrated fuzzy decision‐making model under the hesitancy

This study aims to assess global investment alternatives with respect to renewable energy. Within this framework, five different renewable energy types (biomass, hydropower, geothermal, wind, and solar) are determined as investment alternatives. Moreover, eight different criteria are selected by considering the four different dimensions of balanced scorecard. Additionally, the fuzzy‐based decision making trial and the evaluation laboratory under the hesitancy (HF‐DEMATEL) model are taken into the account to weight these dimensions and criteria and the technique for order the preferences by the similarity to the ideal solution with the fuzzy hesitant methodology (HF‐TOPSIS) is considered to select the alternatives of renewable energy investments. The novelties of this study are to propose an integrated model and provide the balanced scorecard–based evaluations of global renewable energy investment alternatives. The findings show that learning and growth and customer are the most important dimensions for the investment on renewable energy. It is also identified that market potential, product customization, and technological development are the most significant criteria for this situation. On the other side, solar and wind energy are the most important renewable investment alternatives. These results explain that technological improvement should be maintained, and customer expectations should be met by the companies. Furthermore, solar power plant and wind power plant should be developed in the countries. For this purpose, governments should give necessary incentives to the investors, such as allocating appropriate lands. These actions can attract the attentions of the potential investors for these renewable energy alternatives. Owing to this issue, it can be possible to increase the capacity of electricity productions in the countries with a potential minimum cost.     

100% Renewable energy systems,climate mitigation and economic growth

Greenhouse gas mitigation strategies are generally considered costly with world leaders often engaging in debate concerning the costs of mitigation and the distribution of these costs between different countries. In this paper, the analyses and results of the design of a 100% renewable energy system by the year 2050 are presented for a complete energy system including transport. Two short-term transition target years in the process towards this goal are analysed for 2015 and 2030. The energy systems are analysed and designed with hour-by-hour energy system analyses. The analyses reveal that implementing energy savings, renewable energy and more efficient conversion technologies can have positive socio-economic effects, create employment and potentially lead to large earnings on exports. If externalities such as health effects are included, even more benefits can be expected. 100% Renewable energy systems will be technically possible in the future, and may even be economically beneficial compared to the business-as-usual energy system. Hence, the current debate between leaders should reflect a combination of these two main challenges.     

ASSESSING NEW ENERGY TECHNOLOGIES USING AN ENERGY SYSTEM MODEL WITH ENDOGENIZED EXPERIENCE CURVES

Most energy systems models treat reductions of technology investment costs exogenously. In these models, investments may be postponed until the costs become low. This model behaviour is unreasonable, since early investments are necessary to realize the cost reductions, a phenomenon known as the experience effect. We have developed a global energy systems model with endogenized experience curves, and have conducted a pilot study to demonstrate the new insights which can be obtained with the model. In this initial application, we study the emergence of new energy technologies such as photovoltaics and fuel cells, competition between technologies and technology lock-in effects. © 1997 by John Wiley & Sons, Ltd.