Renewable Energy Support Policy Design

Abstract

As most types of renewable generation technologies are relatively expensive, at the prevailing electricity market prices, government support is crucial to promote their share in the generation mix. Nonetheless, designing a suitable support scheme is not a straightforward task, not least because of the competing and sometimes conflicting objectives of policies. This chapter reviews renewable support models and highlights their main specifications in relation to providing incentive for investment and cost reduction, as well as compatibility with renewable policy design principles. It concludes that the choice of support scheme depends on the characteristics of the electricity market, technology, economic institutions, public acceptance, and the ability of the model to reduce risk to investors and provide efficiency.