Market-based support schemes for renewable energy sources
- Autores: Riccardo Fagiani
- Directores de la Tesis: Margot Weijnen (dir. tes.), Rudi Hakvoort (codir. tes.)
- Lectura: En la Universidad Pontificia Comillas ( España ) en 2014
- Idioma: español
- Tribunal Calificador de la Tesis: Peter Wieringa (presid.), Michel Rivier Abbad (voc.), Lennart Soder (voc.), Martinus Arnoldus Matheus Maria Van der Meijden (voc.), Jean-Michel Glachant (voc.)
- Materias:
- Enlaces
- Tesis en acceso abierto en: TESEO
- Resumen
This dissertation focuses on market-based mechanisms and how they can promote renewable energy development in the most effective and efficient way for society. Together with the EU ETS, supporting renewable energy is necessary to achieve a sustainable electricity sector efficiently. Open-ended feed-in mechanisms led to boom and bust investment cycles in many European countries, where national governments were forced to retroactively reduce the subsidy levels and in some cases to suspend the support program in order to limit unsustainable subsidy costs after years of boom in the renewable energy sector. Chapters 3 and 4 indicate that an annual quantity target is necessary to obtain a stable development of the renewable sector and that quantity-based mechanisms should be preferred. Due to the flat marginal cost curve of many RES, price-based mechanisms cause high uncertainty in quantities. Unexpected high volumes of renewable electricity generation may also alter the well-functioning of the EU ETS, causing low carbon prices to attract investments in coal-fired generators which could lock the power sector into a pathway of higher future emissions. Two alternative quantity-based mechanisms have been implemented by policy makers in Europe so far: TGC markets and tendering mechanisms. Chapters 4 and 5 indicates that a renewable quota obligation based on a system of TGCs is risky for investors and its performance strongly depends on investors¿ risk aversion. Regulators may introduce a floor price to reduce project risk in a TGC system. The result of this hybrid policy, however, strongly depends on the regulator setting the right price level, similarly to a feed-in mechanism. On the other hand, a tender mechanism is very cost-effective. This mechanism, however, eliminates the short-term market for TGCs, reducing allocative efficiency and cost-reduction incentives for generators. Efficiency is also slightly reduced by the bargaining power retained by investors in the auction that may cause above-normal profit margins for generators. This dissertation proposes an innovative market-based policy, instead. The proposed approach consists in combining a traditional TGC market with a system of certificate call options auctioned by the regulator on behalf of obliged entities. This mechanism represents a hybrid between a TGC market and a tendering system, combining the best characteristics of the two. This system is fair to both consumers and producers, allowing consumers to bargain for a reasonable price in the market while protecting investors with reduced revenue uncertainty. Nonetheless, the European experience indicates that the performance of a TGC market depends on its regulatory framework and policy stability. Flexible TGC supply is necessary for the market to function efficiently, since demand is administratively set and price-inelastic. The green certificate option mechanism is easily combined with technology banding, allowing policy makers to allocate a certain percentage of options to flexible biomass-fired generators. In addition, regulators should permit certificate banking and intertemporal trading.
In conclusion, an efficient policy for supporting renewable energy should let the interplay between demand and supply establish a fair subsidy level for renewables. Policy makers should limit their role to defining an annual RES target and the contribution of each technology to it. A third design variable consists of deciding the proportion of fixed and volatile subsidy. The cost structure of some renewable energy technologies, in fact, requires a certain degree of revenue predictability to make these projects easier to finance. So far, policy makers have always opted for either fixed or volatile subsidies. This thesis demonstrates that it is possible to allocate the subsidy level of each technology between a fixed and a variable part, providing regulators with a wide range of options. By tuning the three design variables correctly, policy makers can achieve renewable energy targets efficiently and effectively.
