Comparison of Feed-in Tariffs and Tenders to Remunerate Solar Power Generation

Discussion Papers 1363, 31 S.

Thilo Grau


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This paper analyzes the trade-offs for using feed-in tariffs or tenders to remunerate different scales of solar photovoltaics (PV) projects. In recent years, European countries increasingly combined feed-in tariffs for small renewables systems with tenders for large installations. This study develops an analytic framework to quantify deployment effectiveness of responsive feed-in tariff adjustment mechanisms across project scales and to compare specific cost effectiveness factors of feed-in tariffs and tenders for PV plants with their dynamic cost trends. To assess deployment effectiveness, an analytic model is used to simulate installations and feed-in tariffs for different project sizes. Then semi-structured interviews with German and French project developers are conducted to identify additional factors to be considered for a comparison of feed-in tariffs and tenders, and to explore how different remuneration schemes impact cost of capital and transaction costs. The paper finally discusses the relative merits of feed-in tariffs and tenders.

JEL-Classification: O33;Q42;Q48
Keywords: Feed-in tariff, tender, solar photovoltaics
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