What lessons have been learned in reforming the Renewables Obligation? An analysis of internal and external failures in UK renewable energy policy

Wood, Geoffrey; Dow, Stephen

doi:10.1016/j.enpol.2010.11.012

Cited by 90 publications

(41 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The government recognised the above discourse on capital constraints, explaining 'the current market arrangements will not deliver this investment, therefore EMR provides the tools needed to meet the challenge' (DECC, 2012, p. 12). The previous market arrangements for RE capacity were renewables obligation certificates (ROCs), which comprise tradable green certificates for renewable generation, which provided additional but uncertain revenue to renewable developers beyond the market price of that energy (Wood & Dow, 2011). The ROC regime was seen as contributing to perceptions of the UK renewables market as 'high risk', particularly as final prices for renewable generation were subject to ROC and wholesale electricity price fluctuations (Gross et al, 2010;Wood & Dow, 2011).…”

Section: Climate Policymentioning

confidence: 99%

“…The previous market arrangements for RE capacity were renewables obligation certificates (ROCs), which comprise tradable green certificates for renewable generation, which provided additional but uncertain revenue to renewable developers beyond the market price of that energy (Wood & Dow, 2011). The ROC regime was seen as contributing to perceptions of the UK renewables market as 'high risk', particularly as final prices for renewable generation were subject to ROC and wholesale electricity price fluctuations (Gross et al, 2010;Wood & Dow, 2011). The move away from a tradable certificates approach for subsidising renewable generation, towards a FiT-type approach (with CfDs), is one of the keystone policies of EMR, designed to reduce price risks by providing greater certainty in order to attract new investors into the RE space (Redpoint, 2010).…”

Section: Climate Policymentioning

confidence: 99%

“…In recognising the investment challenge, much scholarship to date has focused on market incentive tools, such as renewable energy (RE) subsidies (Gross, Blyth, & Heptonstall, 2010;Wood & Dow, 2011), emissions trading mechanisms Hintermann, 2010), and the relative merits of pricing carbon (Aldy & Stavins, 2012;Cetin & Verschuere, 2009;Ellerman, Convery, & De Perthuis, 2010). However, these studies treat the availability of capital for system transitions as given; if only the right risk and return ratios can be created by energy policy, low-carbon transitions will present cogent profit opportunities, which finance capital will exploit.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Investing in low-carbon transitions: energy finance as an adaptive market

2015

View full text Add to dashboard Cite

The amount of capital required to transition energy systems to low-carbon futures is very large, yet analysis of energy systems change has been curiously quiet on the role of capital markets in financing energy transitions. This is surprising given the huge role finance and investment must play in facilitating transformative change. We argue this has been due to a lack of suitable theory to supplant neoclassical notions of capital markets and innovation finance. This research draws on the notion from Planetary economics: Energy, climate change and the three domains of sustainable development, by Grubb and colleagues, that planetary economics is defined by three 'domains', which describe behavioural, neoclassical, and evolutionary aspects of energy and climate policy analysis. We identify first-and second-domain theories of finance that are well established, but argue that third-domain approaches, relating to evolutionary systems change, have lacked a compatible theory of capital markets. Based on an analysis of electricity market reform and renewable energy finance in the UK, the 'adaptive market hypothesis' is presented as a suitable framework with which to analyse energy systems finance. Armed with an understanding of financial markets as adaptive, scholars and policy makers can ask new questions about the role of capital markets in energy systems transitions. Policy relevanceThis article explores the role of financial markets in capitalising low-carbon energy systems and long-term change. The authors demonstrate that much energy and climate policy assumes financial markets are efficient, meaning they will reliably capitalise low-carbon transitions if a rational return is created by subsidy regimes or other market mechanisms. The authors show that the market for renewable energy finance does not conform to the efficient markets hypothesis, and is more in line with an 'adaptive' markets understanding. Climate and energy policy makers that design policy, strategy, and regulation on the assumption of efficient financial markets will not pay attention to structural and behavioural constraints on investment; they risk falling short of the investment levels needed for long-term systems change. In short, by thinking of financial markets as adaptive, the range of policy responses to enable low-carbon investment can be much broader.

show abstract

Section: Climate Policymentioning

confidence: 99%

Section: Climate Policymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Investing in low-carbon transitions: energy finance as an adaptive market

2015

View full text Add to dashboard Cite

show abstract

“…Thereby, they appropriately account for technology-related differences in learning curves and spillover effects and allow targeted support for innovative but not-yet-competitive technologies [31,32,36]. In contrast, quotas promote primarily those technologies which are closest to the market, and can bring about large rents for these technologies [32,37,38]. In the Swedish tradable certificate scheme, observed rents amounted to as much as 55-75% of the overall remuneration paid to electricity producers [39].…”

Section: Policy Reviewmentioning

confidence: 99%

“…Correspondingly, the risk premiums and security deposits required by banks are small [49,50]. In contrast, capital costs have been significantly higher under quotas, where future remuneration levels are variable and market-dependent [25,27,37,38,40,51,52]. In this respect, FITs are more suitable to overcome capital-market barriers and reduce RES-E deployment costs.…”

Section: Policy Reviewmentioning

confidence: 99%

Carbon Lock-Out: Advancing Renewable Energy Policy in Europe

et al. 2012

View full text Add to dashboard Cite

As part of its climate strategy, the EU aims at increasing the share of electricity from renewable energy sources (RES-E) in overall electricity generation. Attaining this target poses a considerable challenge as the electricity sector is "locked" into a carbon-intensive system, which hampers the adoption of RES-E technologies. Electricity generation, transmission and distribution grids as well as storage and demand response are subject to important path dependences, which put existing, non-renewable energy sources at an advantage. This paper examines how an EU framework for RES-E support policies should be designed to facilitate a carbon lock-out. For this purpose, we specify the major technological, economic and institutional barriers to RES-E. For each of the barriers, a policy review is carried out which assesses the performance of existing policy instruments and identifies needs for reform. The review reveals several shortcomings: while policies targeting generation are widely in place, measures to address barriers associated with OPEN ACCESSEnergies 2012, 5 324 electricity grids, storage and demand are still in their infancy and have to be extended. Moreover, the implementation of policies has been fragmented across EU Member States. In this respect, national policies should be embedded into an integrated EU-wide planning of the RES-E system with overarching energy scenarios and partially harmonized policy rules.

show abstract

An Institutional Perspective on the Low Carbon Transition

Andrews‐Speed

2015

Handbook of Clean Energy Systems

View full text Add to dashboard Cite

The transition to a low carbon economy requires a change of sociotechnical regime or, in other words, a change in the way that society and technology interact. This, in turn, entails changes in economic, political, and societal institutions, the term institutions referring to the formal and informal rules and the expectations that govern the behavior of actors in a society. Tangible factors such as the availability of technology and skills and the endowment of resources and infrastructure provide significant constraints to countries seeking to undertake the transition to a low carbon economy. However, institutions also play a strong role in constraining the rate and shaping the path to a low carbon economy. As each nation is characterized by different institutions, the nature of the low carbon transition will vary from country to country, and even within individual countries. This article explains the relevance of institutions to the low carbon transition and applies this understanding to China and the United Kingdom in order to examine how different types of institution shape the way in which energy is governed, with particular reference to the consequences for the deployment of renewable energy.

show abstract

What lessons have been learned in reforming the Renewables Obligation? An analysis of internal and external failures in UK renewable energy policy

Cited by 90 publications

References 12 publications

Investing in low-carbon transitions: energy finance as an adaptive market

Investing in low-carbon transitions: energy finance as an adaptive market

Carbon Lock-Out: Advancing Renewable Energy Policy in Europe

An Institutional Perspective on the Low Carbon Transition

Contact Info

Product

Resources

About