Econonomics of Energy and Environmental Policy

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Do Almost Mature Renewable Energy Technologies Still Need Dedicated Support Towards 2030?

Abstract:
The discussion on whether and how to continue support for almost mature renewable electricity (RES-E) technologies, such as onshore wind and PV, has recently intensified. In this paper we analyze arguments in the literature in favor and against the phase-out of renewables support in the context of increasingly competitive RES-E technologies. We conclude that there are good reasons to continue dedicated RES-E policies beyond 2020 for those technologies. Dedicated RES-E support can provide a predictable, secure investment framework that lowers the risk premiums required by investors and therefore reduces the capital costs of RES-E. In addition, there are still significant cost reduction potentials for these technologies. The increased use of renewables has multiple socio-economic benefits in addition to climate change mitigation. These arguments are still valid when looking at the current market situation characterized by oversupply and low prices on both the CO2 market and some power markets in Europe. Since renewables are not the main reason for the current oversupply, it would not be effective to take actions towards restoring market equilibrium in the form of radical or overall phase-out of RES-E support.
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Keywords: renewable energy, regulation, wind energy, PV, CO2 emissions

DOI: 10.5547/2160-5890.8.2.ahel


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Published in Volume 8, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


 

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