Vortrag
Assessing the Strength and Effectiveness of Renewable Electricity Feed-in Tariffs

Steffen Jenner, Felix Groba, Joe Indvik


Redefining the Energy Economy: Changing Roles of Industry, Government and Research : 30th USAEE/IAEE North American Conference
Washington, DC, USA, 09.10.2011 - 12.10.2011



Abstract:
Many countries have passed regulations to encourage renewable electricity (RES-E) generation in the last two decades. The two most popular policy types are feed-in tariffs (FIT) and renewable portfolio standards (RPS). A few econometric studies have assessed the effectiveness of these policies, but most do not account for policy design features and market characteristics that influence policy strength. In this paper, we employ 1998-2008 panel data to assess the effectiveness of FIT policies in promoting solar photovoltaic (PV) and onshore wind power development in the EU countries for the first time. We develop a new indicator for FIT strength that captures variability in tariff size, contract duration, digression rate, wholesale electricity price, and electricity generation cost to estimate the return on investment provided by each FIT. We then regress this indicator on added RES-E capacity using a fixed-effects model to control for country characteristics that may influenceboth policy implementation and RES-E development. We find that FIT policies have driven solar PV and onshore wind capacity development in Europe since 1998. However, this effect is overstated without controlling for country characteristics and may not be observed at all without accounting for the unique design of each policy. Our results therefore make a case for more rigorous analysis of RES-E policies, particularly the inclusion of controls for regional characteristics and policy design elements. We provide empirical evidence that the unique characteristics of each FIT and the market it affects are a more important determinant of RES-E development than the enactment of a FIT alone.

Abstract

Many countries have passed regulations to encourage renewable electricity (RES-E) generation in the last two decades. The two most popular policy types are feed-in tariffs (FIT) and renewable portfolio standards (RPS). A few econometric studies have assessed the effectiveness of these policies, but most do not account for policy design features and market characteristics that influence policy strength. In this paper, we employ 1998-2008 panel data to assess the effectiveness of FIT policies in promoting solar photovoltaic (PV) and onshore wind power development in the EU countries for the first time. We develop a new indicator for FIT strength that captures variability in tariff size, contract duration, digression rate, wholesale electricity price, and electricity generation cost to estimate the return on investment provided by each FIT. We then regress this indicator on added RES-E capacity using a fixed-effects model to control for country characteristics that may influenceboth policy implementation and RES-E development. We find that FIT policies have driven solar PV and onshore wind capacity development in Europe since 1998. However, this effect is overstated without controlling for country characteristics and may not be observed at all without accounting for the unique design of each policy. Our results therefore make a case for more rigorous analysis of RES-E policies, particularly the inclusion of controls for regional characteristics and policy design elements. We provide empirical evidence that the unique characteristics of each FIT and the market it affects are a more important determinant of RES-E development than the enactment of a FIT alone.

Themen: Energiewirtschaft



Keywords: Renewable energy, Feed-in tariff, Panel data models
DIW-Link
Array

keyboard_arrow_up