On the Effectiveness of Feed-in Tariffs in the Development of Solar Photovoltaics

Abstract

Growing concern about climate change and rising prices of fossil fuels has prompted governments to stimulate the development of renewables. The most common instrument is a feed-in tariff (FIT). This paper empirically tests whether or not FIT policies have been effective in encouraging the development of photovoltaic solar (PV), explicitly taking into account the structure and consistency of FITs. Panel data estimations are employed for 30 OECD member countries in the period 1990-2011. We find a positive effect of the presence of a FIT on the development of a country's added yearly capacity of PV per capita. This is in line with the results found in the existing literature. However, our study shows that the literature underestimates the potential impact of FITs, as the effect of a welldesigned FIT is much larger than the average effect of the currently applied FITs. Not only the height of the tariff is important, but also the duration of the contract and the absence/presence of a cap have an impact. We also show that consistency greatly affects the effectiveness of FITs. Consistency is especially important when the tariff of a FIT is low. The total effect of a FIT can be seven times larger if it is well designed. Our results are robust for differences between countries with respect to the availability of other policy instruments, the use of nuclear or hydro power and the level of CO 2 emissions.

Minimum prices and social interactions: Evidence from the German renewable energy program

“…We do not claim our results should be the sole basis of an evaluation as we have to set aside other dimensions in our analysis. Other important policy objectives of feedin-tariffs are the effect on overall capacity of renewable energy (Dijkgraaf et al, 2018) or innovation (Böhringer et al, 2017). Previous research also looked into political constraints which are important in the assessment of policies (Kalkuhl et al, 2013) and in the understanding of how current policies came about (Jacobsson and Lauber, 2006).…”

Determinants of solar photovoltaic deployment in the electricity mix: Do oil prices really matter?

“…11 Couture and Gagnon ( 2010), Fouquet and Johansson (2008), Kilinc-Ata ( 2016), Menanteau et al (2003), Nicolini and Tavoni (2017), Rickerson et al (2007), and Zhao et al (2013) also conclude that FITs are effective RE instruments. Dijkgraaf et al (2018) find a positive impact on RE as well, but specify that this effect is generally underestimated in the literature. However, del Río and Bleda (2012) suggest that FITs can be more effective when included in a mix of green policies.…”

Trajectories for energy transition in the countries of the European Union over the period 2000-2015: a multidimensional approach

“…For example, in the early 2000s most European Union countries set up a guaranteed purchase price mechanism aimed at promoting the development of renewable energy [28]. If feed-in tariffs and feed-in-premiums are the main support schemes for the deployment of renewable technologies in the EU electricity sector [29,30], it has been increasingly recognised that a mix of policy instruments is needed to foster low-carbon transitions [31,32]. Furthermore, these instruments may change signi cantly over time and differ according to the country to address different national objectives and stages on innovation [33].…”