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Which is a Better Second Best Policy, the Feed-in Tariff Scheme or the Renewable Portfolio Standard Scheme? (Japanese)

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  • HIBIKI Akira
  • KURAKAWA Yukihide

Abstract

Much attention has been paid to the feed-in tariff (FIT) scheme and the renewable portfolio standard (RPS) scheme to promote the usage of renewable energy recently. When a non-renewable generator, which is a monopolist in the retail market, is a dominant firm and renewable generators are competitive fringes in the renewable electric market, under the FIT scheme, a non-renewable generator utilizes its market power only in the retail market. Under the RPS scheme, a non-renewable generator utilizes its market power in both the retail market and the renewable electricity market. In addition, a non-renewable generator needs to purchase a certain percentage of its electricity production from renewable generators. Thus, it has an incentive to reduce production due to higher marginal cost. The main findings of this article are that the RPS scheme: (1) is more socially desirable when marginal external cost is high and (2) is able to achieve the first best by appropriate initial deductions for the purchase of electricity from renewable generators.

Suggested Citation

  • HIBIKI Akira & KURAKAWA Yukihide, 2013. "Which is a Better Second Best Policy, the Feed-in Tariff Scheme or the Renewable Portfolio Standard Scheme? (Japanese)," Discussion Papers (Japanese) 13070, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:rdpsjp:13070
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    File URL: https://www.rieti.go.jp/jp/publications/dp/13j070.pdf
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    Cited by:

    1. Siddiqui, Afzal S. & Tanaka, Makoto & Chen, Yihsu, 2016. "Are targets for renewable portfolio standards too low? The impact of market structure on energy policy," European Journal of Operational Research, Elsevier, vol. 250(1), pages 328-341.

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