How fit are feed-in tariff policies ? evidence from the European wind market

Fan Zhang

No 6376, Policy Research Working Paper Series from The World Bank

Abstract: Feed-in tariffs have become the most widely used policy instrument to promote renewable energy deployment around the world. This paper examines the relation between tariff setting and policy outcome based on wind capacity expansion in 35 European countries over the 1991-2010 period. Using a dynamic panel data model, it estimates the long-run elasticity of wind deployment with respect to the level of feed-in support. The analysis finds that higher subsidies do not necessarily yield greater levels of wind installation. Non-economic barriers and rent-seeking may have contributed to the weak correlation. On the other hand, the length of feed-in contract and guaranteed grid access are important determinants of policy effectiveness. A one-year extension of an original 5-year agreement on average increases wind investment by 6 percent annually, while providing an interconnection guarantee almost doubles wind investment in one year.

Keywords: Energy Production and Transportation; Climate Change Mitigation and Green House Gases; Carbon Policy and Trading; Climate Change Economics; Markets and Market Access (search for similar items in EconPapers)
Date: 2013-02-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:6376

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