Renewable electricity support systems: Are feed-in systems taking the lead?

Abstract

Support systems for renewable-energy-sourced electricity (RES-E) can be classified into price- and quantity based systems. Their most representative instruments are feed-in systems (price-based) and quota systems, e.g. green certificates or a Renewable Portfolio Standard (quantity-based). The origins of these support systems are quite different and are motivated by different political and economic needs. Likewise their geographical distribution and effectiveness also differ. Worldwide feed-in systems are the most widespread RES-E support system. In recent years, some classical quota countries have partially (or even totally) changed to feed-in systems. Feed-in systems seem to encourage higher RES-E deployment, technology diversity and investor security. Although the manufacturing capacity for certain RES-E technologies has been more developed in some feed-in countries, lately this has changed to some extent due to the incorporation of emerging countries in the RES-E industry. Traditionally, quota systems appeared to be more compatible with liberalisation of the electricity market. However, since the introduction of the premium system, this argument can be countered, since feed-in premiums can be considered compatible with the electricity market as quota systems. Regarding the price paid for RES-E in quota-countries, higher green certificate prices have not led to higher RES-E quantities. Moreover, the relative support levels in quota-countries are higher on average than in FIT-countries, contradicting the common argument that quota systems are more cost effective. Additionally, feed-in systems, especially if stepped tariffs are designed, encourage higher RES-E geographical dispersion; avoiding the concentration of RES-E facilities in just a few locations, which can lead to NIMBY -Not In My Back Yard- syndrome. All these factors may explain the steady spread of feed-in systems worldwide. The purpose of this paper is to assess the performance of quota and feed-in systems, thereby contributing to the worldwide debate on the suitability of the different RES-E support systems.