Quantities vs. capacities: Minimizing the social cost of renewable energy promotion

Arbeitspapier

In this article we show how different promotion schemes for renewables affect economic welfare. Our starting point is that external benefits of renewable electricity supply besides the abatement of greenhouse gases are not related to actual electricity generation but to producing and installing capacity. We argue that generation based subsidies such as feed-in tariffs and bonus payments can only be a second-best solution. Our model framework allows us to explain how these second-best instruments cause welfare losses in an environment of volatile demand. We postulate that capacity payments for renewables should be implemented in order to avoid unnecessary social costs.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CAWM Discussion Paper ; No. 59

Classification and Topics

• Classification: Wirtschaft ; Energy: Demand and Supply; Prices ; Energy: Government Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• Subject: Renewable Energy Sources ; Energy Policy ; Promotion Instruments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Andor, Mark ; Flinkerbusch, Kai ; Voß, Achim
• Event: Veröffentlichung
• (who): Westfälische Wilhelms-Universität Münster, Centrum für Angewandte Wirtschaftsforschung (CAWM)
• (where): Münster
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/62131
• Last update: 10.03.2025, 11:42 AM CET