Effectiveness and efficiency of support schemes for electricity from renewable energy sources

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  • The authors have declared no conflicts of interest in relation to this article.

Abstract

A variety of support schemes for renewable energy sources in the electricity sector (RES-E) are currently being implemented in EU member states. The main tools used for this purpose are either price-based policy instruments such as feed-in tariffs or premiums, or quantity-based instruments such as quota systems using tradable green certificates. Much work has been devoted to the motivation for and evaluation of these instruments, mostly in the form of country/local case studies, model simulations, or econometric modeling. The main drivers behind these policies are addressing the externalities of the environmentally harmful emissions of electricity generation and stimulating technological innovation. Two frequently used evaluation criteria for support schemes and instruments are their effectiveness and economic efficiency. We find that those support schemes, which are most effective in stimulating the growth of RES-E generation, are typically economically efficient as well. Generally, it can be concluded that support schemes, which are technology specific, and those that avoid unnecessary risks in project revenues, are more effective and efficient than technology-neutral support schemes, or schemes with higher revenue risk. The most recent quantitative assessment shows that some convergence can now be observed between schemes applying price- and quantity-based instruments. With respect to policy effectiveness, quota schemes show improvements. Regarding efficiency, the situation is still very heterogeneous, and remuneration levels in many EU member states are still substantially higher than generation costs.

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