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Tradable Renewable Quota vs. Feed-In Tariff vs. Feed-In Premium under Uncertainty

Author

Listed:
  • Robert Marschinski

    (MCC, PIK, TU-Berlin)

  • Philippe Quirion

    (CNRS and CIRED)

Abstract

We study the performance under uncertainty of three renewable energy policy instruments: Tradable Renewable Quota (TRQ), Feed-In-Tariff (FIT), and Feed-In-Premium (FIP). We develop a stylized model of the electricity market, where renewables are characterized by a positive learning externality, which the regulator aims to internalize. Assuming shocks on the fossil-based electricity supply, renewables supply, or on total electricity demand, we analytically derive the conditions determining the instruments’ relative welfare ranking. Although we generally confirm the key role of the slopes of marginal benefits and costs associated with the policy, the specific ranking depends on which type of uncertainty is considered, and whether shocks are permanent or transitory. However, a high learning rate generally favours the FIT, while TRQ is mostly dominated by the other two instruments. These results are confirmed in a numerical application to the US electricity market, in which the FIP emerges as the most robust overall choice and TRQ as the least robust.

Suggested Citation

  • Robert Marschinski & Philippe Quirion, 2014. "Tradable Renewable Quota vs. Feed-In Tariff vs. Feed-In Premium under Uncertainty," Working Papers 2014.14, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2014.14
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    References listed on IDEAS

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    Cited by:

    1. Jakub Sawulski & Jan Witajewski-Baltvilks, 2017. "Optimal RES differentiation under technological uncertainty," IBS Working Papers 07/2017, Instytut Badan Strukturalnych.
    2. Oskar Lecuyer & Philippe Quirion, 2019. "Interaction between CO2 emissions trading and renewable energy subsidies under uncertainty: feed-in tariffs as a safety net against over-allocation," Climate Policy, Taylor & Francis Journals, vol. 19(8), pages 1002-1018, September.

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    More about this item

    Keywords

    Feed-in premium; Feed-in tariff; Renewable energy policy; Renewable portfolio standard; Tradable renewable quota.;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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