Optimal Renewable-Energy Subsidies

Arbeitspapier

We derive optimal subsidization of renewable energies in electricity markets. The analysis takes into account that capacity investment must be chosen under uncertainty about demand conditions and capacity availability, and that capacity as well as electricity generation may be sources of externalities. The main result is that generation subsidies should correspond to externalities of electricity generation (e.g., greenhouse gas reductions), and investment subsidies should correspond to externalities of capacity (e.g., learning spillovers). If only capacity externalities exist, then electricity generation should not be subsidized at all. Our results suggest that some of the most popular promotion instruments are likely to cause welfare losses.

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• ISBN: 978-3-86788-533-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 473

Classification and Topics

• Classification: Wirtschaft ; Energy: Demand and Supply; Prices ; Energy: Government Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• Subject: peak-load pricing ; capacity investment ; demand and supply uncertainty ; renewable energy sources ; energy policy ; optimal subsidies ; feed-in tariffs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Andor, Mark ; Voss, Achim
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2014

Further information

• DOI: doi:10.4419/86788533
• Handle: http://hdl.handle.net/10419/93179