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Open letter by ten European economists on the risks of market premiums.

Report of April 2, 2014

The currently negotiated EU State aid guidelines require that member states provide aid to renewable energy solely in the form of a premium to the market price. Such market premiums risk however the efficiency of short-term, and the effectiveness of forward contracting, markets and increase the costs of financing for renewable projects. They advantage incumbents, create barriers to new entrants, and raise the cost of meeting the renewable targets. They fail DG COMP’s stated intention that aid for renewables should be at least cost to society. If the EU wants to achieve the policy objectives of advancing the EU energy market, reducing costs to consumers, and delivering the EU energy security, renewable and climate targets, it should also allow for the option of using easier to manage feed-in systems.

Please find the open letter here.

For further information on the open letter, please contact Karsten Neuhoff, Department of Climate Policy, DIW Berlin