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.     

RE in EU-28: Renewable energy policies in an enlarged European Union

The goal of increasing the share of renewable energy sources (RES) in total primary energy supply (TPES) as well as in electricity production in an enlarged European Union (EU-28) will be a challenging one and most likely will be addressed by a mix of promotion instruments. Mischa Bechberger and Danyel Reiche take a look at the implications for renewables in an enlarged EU.The most prominent policies in the case of electricity are renewable energy feed-in tariffs (REFIT) and quota systems, but also others like tenders, energy tax exemptions, and environmental funds in the form of investment subsidies, and soft loans are playing a part.     

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.     

The European directive on renewable electricity: conflicts and compromises

As part of its efforts to increase the use of renewable energy in Europe, a Directive regarding renewable electricity was agreed by the European Union in 2001. The purpose of this article is to examine this Directive, examining how the discussions surrounding its content unfolded. The investigation focuses upon three contentious issues that were debated during the Directive's development: the definition of ‘renewable’, the national targets for renewable electricity (their levels, as well as whether they should be ‘binding’ or ‘indicative’) and the questions associated with harmonisation (whether one Union-wide ‘support scheme’ for renewable electricity should be in place, and, if so, what it should be). During the 5 years that the Directive was negotiated, many intra-Union conflicts were eventually resolved, at least temporarily, by compromises. Nevertheless, some difficult decisions regarding the promotion of renewable electricity in the European Union still have to be taken.     

Accounting for variation in wind deployment between Canadian provinces

Wind energy deployment varies widely across regions and this variation cannot be explained by differences in natural wind resources alone. Evidence suggests that institutional factors beyond physical wind resources can influence the deployment of wind energy systems. Building on the work of Toke et al. (2008), this study takes a historical institutionalist approach to examine the main factors influencing wind energy deployment across four Canadian provinces Canada: Alberta, Manitoba, Ontario and Nova Scotia. Our case studies suggest that wind energy deployment depends upon a combination of indirect causal factors—landscape values, political and social movements, government electricity policy, provincial electricity market structure and incumbent generation technologies and direct causal factors—grid architecture, ownership patterns, renewable incentive programs, planning and approvals processes and stakeholder support and opposition.     

Retail price effects of feed-in tariff regulation

The feed-in tariff regulation is the widest spread instrument used to promote electricity generation from renewable energy sources in the EU, with the costs of resources devoted to this promotion usually being borne by final consumers. Two components of the electricity retail price are expected to be influenced by the 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 the feed-in tariff regulation has on the electricity retail price for industrial consumers. We estimate the relative intensity of the impact of the cost of support electricity generation under the feed-in tariff and the electricity wholesale price on the Spanish industrial retail price. Special attention is devoted to technology-specific considerations, as well as short and long run effects. The results show that there is not a strong link between the retail and wholesale market for Spanish industrial consumers. Moreover, the results indicate 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 suggests that, when evaluating the feed-in tariff regulation impact on the retail price, the cost of incentives effect prevails over the wholesale price effect, and this is stronger for solar than for wind generation.     

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.     

Analysing the interactions between renewable energy promotion and energy efficiency support schemes: The impact of different instruments and design elements

CO₂ emissions reduction, renewable energy deployment and energy efficiency are three main energy/environmental goals, particularly in Europe. Their relevance has led to the implementation of support schemes in these realms. Their coexistence may lead to overlaps, synergies and conflicts between them. The aim of this paper is to analyse the interactions between energy efficiency measures and renewable energy promotion, whereas previous analyses have focused on the interactions between emissions trading schemes (ETS) and energy efficiency measures and ETS and renewable energy promotion schemes. Furthermore, the analysis in this paper transcends the “certificate” debate (i.e., tradable green and white certificates) and considers other instruments, particularly feed-in tariffs for renewable electricity. The goal is to identify positive and negative interactions between energy efficiency and renewable electricity promotion and to assess whether the choice of specific instruments and design elements within those instruments affects the results of the interactions.     

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.     

Economic impacts from the promotion of renewable energy technologies: The German experience

The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany’s experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. To the contrary, the government’s support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.     

A method for the correction of the feed-in tariff price for cogeneration based on a comparison between Croatia and EU Member States

The European Commission has adopted Directive 2004/8/EC on the promotion of cogeneration, which the EU Member States, as well as candidates including Croatia, were obliged to accept. Among other terms and conditions, the Directive requires certain support mechanisms, such as feed-in tariff prices and premiums added to market electricity prices. In this paper, the cost effectiveness of selling electricity at the feed-in tariff prices in the selected EU Member States is compared to selling it on the European electricity market, with or without premiums. The results of this comparison will indicate whether correction of the Croatian feed-in tariff price to a higher value would be justified. The cost effectiveness ratio of a cogeneration unit upgraded with mean reverting and jump diffusion processes is used for comparison. At the end of this paper, a method is suggested for the correction of feed-in tariff prices, with examples of corrected prices for the years 2008 and 2009. Such corrections have been proven to be justified and are compared to the feed-in tariff prices in most of the selected EU Member States.     

A market for renewable energy credits in the Indian power sector

Electricity generation from renewable energy sources in India has been promoted through a host of fiscal policies and preferential tariff for electricity produced from the same. The fiscal policies include tax incentives and purchase of electricity generated through renewable energy sources. The enactment of the Electricity Act 2003 (the Act) has lent further support to renewable energy by stipulating purchase of a certain percentage of the power procurement by distribution utilities from renewable energy sources. The renewable portfolio obligation as well as the feed-in tariff for power procurement has been specified by a number of State Electricity Regulatory Commissions (SERCs) for the respective state under their jurisdiction. A feed-in tariff determined through a cost-plus approach under a rate of return framework lacks incentive for cost minimisation and does not encourage optimal utilisation of renewable energy resources in the country. Such regulatory provisions differ across states.The prevalent practice of fixing a renewable portfolio obligation along with cost-based feed-in tariffs disregards economic efficiency. The paper proposes nationally tradable renewable energy credits scheme for achieving the targets set by the respective SERCs as renewable portfolio obligation. This would reduce the cost of compliance to a renewable portfolio obligation, and would encourage efficient resource utilisation and investment in appropriate technologies. The paper highlights its advantages and implementation issues. This paper discusses regulatory developments for promotion of renewable energy in various Indian states. The paper also identifies a number of issues related to regulations concerning renewable portfolio obligation.     

The impact of the German feed-in tariff scheme on innovation: Evidence based on patent filings in renewable energy technologies

Over the last two decades, feed-in tariffs have pushed the massive expansion of electricity from renewable energy sources in Germany. Between 1991 and 1999, feed-in tariffs were prescribed through the Electricity Feed-in Law – the so-called Stromeinspeisungsgesetz (SEG) – at relatively moderate rates. From 2000 onwards, the SEG was replaced by the Renewable Energy Sources Act – the so-called Erneuerbare-Energien-Gesetz (EEG) – with much higher subsidy rates. The rise in subsidies to renewable power generation under the EEG came along with a substantial increase in electricity prices provoking an intense public debate on the benefits of renewable energy promotion. In our regression analysis, we assess one popular justification for feed-in tariffs: the demand-side effect of induced innovation. We find that the innovation impact of the German feed-in tariff scheme over the last two decades supports the positive innovation hypothesis. However, the inducement effect of the feed-in tariff scheme under the EEG is not significantly different from that of the SEG. Given the drastic cost of the EEG, we caution against the appraisal of the EEG feed-in tariff scheme solely on the grounds of its impact on technological innovation.     

Towards an international tradable green certificate system—The challenging example of Belgium

In Europe, a common framework for renewable energy sources (RES) is aspired. Tradable green certificates (TGCs) are a market-based cost-efficient means to stimulate electricity production from RES. Since TGCs are the most widespread support scheme in Europe together with feed-in tariffs, chances are that a common European framework could well be based on TGCs. However, while integrating currently existing different national TGC systems, any remaining differences should be carefully considered. Just how difficult the creation of an international TGC market would be is illustrated in this paper by the case of Belgium, where no less than 4 different TGC systems exist nowadays. The example of Belgium illustrates that harmonizing different TGC systems is easier said than done and represents a serious challenge. This clearly illustrates that a single European support scheme for RES, however desirable, is still far in the future.     

On international renewable cooperation mechanisms: The impact of national RES-E support schemes

The deployment of renewable cooperation mechanisms within the European Union (via statistical transfers, joint support schemes and joint projects) is expected to increase in the near future. Such cooperation mechanisms can significantly reduce the compliance cost for meeting renewable energy targets. Nevertheless, as it is known that ill-designed national support instruments distort renewable investment and production decisions, it can also be expected that these impact the performance of cooperation mechanisms. In this paper, we develop a bi-level two-country competitive equilibrium model that analyzes the impact of national RES-E support instruments on the performance of renewable cooperation mechanisms. Furthermore, we assess the efficiency of two international cooperation mechanisms (statistical transfers and joint support schemes) and compare it to the situation without renewable cooperation. Based on an analytical derivation and a numerical example, we first confirm that fixed feed-in premiums are the globally most efficient instrument, given production-based quotas (in MWh). Other national instruments (feed-in tariffs and capacity-based subsidies) can distort renewable investment decisions, and are sub-optimal. Second, the employment of statistical transfers always outperforms the no-renewable cooperation case, independent of the national support instruments. Third, statistical transfers are preferred over joint support schemes when employing sub-optimal national policy instruments. In fact, it even is possible that sub-optimal joint support schemes (i.e. not based on the fixed feed-in premium) perform worse than no renewable cooperation at all. Finally, we also consider the country-level distributional effects and conclude that country-level incentives for renewable cooperation may not align with the global optimum, i.e. national policy makers might be incentivized to constrain their cooperation levels.     

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.     

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.     

An integrated assessment of the feed-in tariff system in Spain

Given the relative socioeconomic and environmental benefits linked to the deployment of electricity from renewable energy sources (RES-E), its public promotion has been a priority on the agendas of governments in virtually all European countries. The Spanish government has not been an exception in this regard. Public support at the national level has been based on a feed-in tariff (FIT) scheme, which has had its pros and cons in the encouragement of effective and cost-effective deployment of RES-E. Based on different information sources and empirical data, this paper provides an integrated assessment of the system in the period of influence of the Royal Decree 2818/1998 (i.e., between 1999 and 2003), according to different criteria. The strong and weak points of the system are assessed. The paper suggests that some of its elements should be redesigned.     

Renewable energy regulation and structural breaks: An empirical analysis of Spanish electricity price volatility

International experience proves that electricity prices have undergone major changes in volatility since the entry of green technologies. The intermittency of renewable sources is one of the reasons for these changes, as it leads to higher volatility in periods of higher participation by renewables. We argue that the development of the regulatory system promoting renewable electricity also plays a crucial role. We raise a question that deserves attention: could an incentive scheme induce higher share of renewables and lower volatility simultaneously? In this paper, we conduct an empirical analysis with Spanish data. We analyze possible ensuing structural changes in Spanish electricity spot price volatility from January 2002 to December 2017. We identify two structural breaks linked to important measures related to renewable electricity: (i) the abolishment of the feed-in tariff scheme; and (ii) the establishment of a more market-oriented regulation based on investment and operating costs. We conclude that stable regulatory policies reduce volatility even though the presence of renewable sources is greater. Furthermore, market-based policy measures achieve lower volatility, encouraging good integration of intermittent renewable electricity.