Assessment of the feed-in tariff mechanism for renewable energies in Taiwan

Due to Taiwan's lack of natural resources, dependence on imported energy, and pursuit of sustainable development, renewable energies are extremely important for Taiwan's future energy supply. Since Taiwan's feed-in tariff (FIT) is still in its initial stage, one must examine whether the current system is compatible with a well-designed FIT scheme. This study examines the main features of Taiwan's FIT system and assesses design options using several criteria. Additionally, one of the most important elements of a FIT scheme, namely, a tariff system, is discussed. Taiwan's FIT scheme has the design options required by well-functioning FITs, and the guaranteed-return tariff system coincides with the spirit underlying leading global FITs; however, many issues, such as setting goals by stages, refinement of the tariff calculation methodology, and elimination of other non-economic barriers, must be addressed to achieve future developmental goals and green industry growth.     

Does a small difference make a difference? Impact of feed-in tariff on renewable power generation in China

This study investigates the effectiveness of regionally differentiated feed-in tariffs (FIT) for the development of renewable energy in China. By using a spatial regression discontinuity design, we estimate the impacts of regionally differentiated FITs on the outcome indicators of wind and solar power generation, such as utilization rate, installed capacity, power generation, and hours of operation. Our findings show that FIT implementation plays an important role in promoting renewable energy development. A small difference in the tariff rate leads to statistically significant differences in outcome indicators among regions. Our results suggest that regionally differentiated FITs might help mitigate the overproduction of wind electricity in regions with abundant wind resources but low electricity demand. In addition, we conclude that enlarged tariff gap among regions can lead to greater impact on increasing installations of renewable power generation facilities in resource-poor regions.     

Feed-in tariff and tradable green certificate in oligopoly

Feed-in tariff (FIT) and tradable green certificate (TGC) schemes are studied in a formal model and numerical example using the UK data. We find that if the markets were perfectly competitive, then feed-in tariff and the certificate price would be the same. However, when the markets are imperfect, they are generally different. While both the tariff and certificate price fluctuate around the difference between the costs of green and black energy, the tariff deviates more from the cost difference than the certificate price. The supplies of both black and green energy under FIT are higher than TGC, obviously as a result of subsidies. A troubling outcome is that the total energy supply increases under FIT as the renewables quota increases, which can negate other measures to mitigate climate changes such as demand management. Finally, using the data from the UK market, we find that social welfare under TGC is consistently higher than FIT for a wide range of values of the parameters.     

Case study feasibility analysis of the Pelamis wave energy convertor in Ireland, Portugal and North America

The performance and economic viability of the Pelamis wave energy converter (WEC) has been investigated over a 20 year project time period using 2007 wave energy data from various global locations: Ireland, Portugal, USA and Canada. Previous reports assessing the Pelamis quote a disparate range of financial returns for the Pelamis, necessitating a comparative standardised assessment of wave energy economic indicators. An Excel model (NAVITAS) was created for this purpose which estimated the annual energy output of Pelamis for each location using wave height (H_s) and period (T_z) data, and produced financial results dependant on various input parameters. The economic indicators used for the analysis were cost of electricity (COE), net present value (NPV) and internal rate of return (IRR), modelled at a tariff rate of €0.20/kWh). Analysis of the wave energy data showed that the highest annual energy output (AEO) and capacity for the Pelamis was the Irish site, as expected. Portugal returned lower AOE similar to the lesser North American sites. Monthly energy output was highest in the winter, and was particularly evident in the Irish location. Moreover, the difference between the winter wave energy input and the Pelamis energy output for Ireland was also significant as indicated by the capture width, suggesting that Pelamis design was not efficiently capturing all the wave energy states present during that period. Modelling of COE for the various case study locations showed large variation in returns, depending on the number of WEC modelled and the initial cost input and learning curve. COE was highest when modelling single WEC in comparison to multiples, as well as when using 2004 initial costs in comparison to 2008 costs (at which time price of materials peaked). Ireland returned the lowest COE of €0.05/kWh modelling over 100 WEC at 2004 cost of materials, and €0.15/kWh at 2008 prices. Although favourable COE were recorded from some of the modelled scenarios, results indicated that NPV and IRR were not encouraging when using a €0.20/kWh tariff. It is recommended that a tariff rate of €0.30/kWh be considered for Ireland, and higher rates for other locations. In conclusion, Ireland had the most abundant wave energy output from the Pelamis. COE returns for Ireland were competitive for large number of WEC, even at peak costs, but it is recommended that careful analysis of NPV and IRR should be carried out for full economic assessment. Finally, a standardised method of COE reporting is recommended, using fixed WEC number or MW size, as well as standardised learning/production curves and initial costs, to facilitate confidence in investment decisions based on COE.     

Agriculture's contribution to the renewable energy sector: Policy and economics – Do they add up?

This paper reviews on-farm renewable energy (RE) production and the associated feed-in tariff (FIT) policies in Germany, USA, Canada, Denmark and the Netherlands and the impact these policies have on Renewable energy implementation with particular focus on agricultural lands. A recent FIT policy implemented in Nova Scotia is examined and used as a case study to assess the potential affect these policies might be expected to have on RE implementation within the province. Several scenarios are developed based on the existing policy structure to provide a critical review of the policy and to identify potential modifications that might provide an increase in the implementation of RE.     

The public promotion of wind energy in Spain from the transaction costs perspective 1986–2007

This paper analyzes the success of wind energy in Spain from 1986 to 2007. Certain special characteristics have emerged in Spain that provide credibility to the feed-in tariff (FIT) device to promote this energy source. To explain this success, the analysis will focus on the intrinsic characteristics of FIT using the concepts of the transaction cost theory (TCE). Nevertheless, in this framework, special attention is placed on the role that specific political and institutional factors have played in providing stability to this instrument. Thanks to an early start and an on-going and generous FIT device, wind energy promotion for electricity has become a political success story in Spain. The main implication of this analysis is that this success is mainly due to the trade-off between stability and flexibility in the use of Spanish FIT.     

Cost and optimal feed-in tariff for small scale photovoltaic systems in China

China has recently become a dominant player in the solar photovoltaic (PV) industry, producing more than one-third of the global supply of solar cells in 2008. However, as of 2008, less than 1% of global installations were based in China. Recently, the government has stated its grand ambitions of expanding the share of electricity derived from solar power. As part of this initiative, policy makers are currently in the process of drafting a feed-in tariff policy to support the development of the solar energy market. In this paper, we aim to calculate what the level of such a tariff should be. We develop a closed form equation for the cost of PV, and use forecasts on prices of solar systems to derive an optimal feed-in tariff, including a digression rate. The focus is on the potential of residential and small scale commercial solar PV installations. We show that the cost of small scale PV in China has decreased rapidly during the period 2005–2009. Our analysis also shows that optimal feed-in tariffs vary widely between regions within China, and that grid parity could be reached in large parts of the country depending on the expected escalation in electricity prices.     

Economic modelling of price support mechanisms for renewable energy: Case study on Ireland

The Irish Government is considering its future targets, policy and programmes for renewable energy for the period beyond 2005. This follows a review in 2003 of policy options that identified a number of different measures to stimulate increased deployment of renewable energy generation capacity. This paper expands this review with an economic analysis of renewable energy price support mechanisms in the Irish electricity generation sector. The focus is on three primary price support mechanisms quota obligations, feed in tariffs and competitive tender schemes. The Green-X computer model is utilised to characterise the RES-E potential and costs in Ireland up until, and including, 2020. The results from this dynamic software tool are used to compare the different support mechanisms in terms of total costs to society and the average premium costs relative to the market price for electricity. The results indicate that in achieving a 20% RES-E proportion of gross electricity consumption by 2020, a tender scheme provides the least costs to society over the period 2006–2020 but only in case there is limited or no strategic bidding. Considering, however, strategic bidding, a feed-in tariff can be the more efficient solution. Between the other two support mechanisms, the total costs to society are highest for feed-in-tariffs (FIT) until 2013, at which point the costs for the quota system begin to rise rapidly and overtake FIT in 2014–2020. The paper also provides a sensitivity analysis of the support mechanism calculations by varying default parameters such as the interim (2010) target, the assumed investment risk levels and the amount of biomass co-firing. This analysis shows that a 2010 target of 15% rather than 13.2% generates lower costs for society over the whole period 2006–2020, but higher costs for the RES-E strategy over the period 2006–2010.     

Feed-in tariff structure development for photovoltaic electricity and the associated benefits for the Kingdom of Bahrain

In this study, the feed-in tariff (FIT) scheme was considered to facilitate an effective introduction of renewable energy in the Kingdom of Bahrain. An economic model was developed for the estimation of feasible FIT rates for photovoltaic (PV) electricity on a residential scale. The calculations of FIT rates were based mainly on the local solar radiation, the cost of a grid-connected PV system, the operation and maintenance cost, and the provided financial support. The net present value and internal rate of return methods were selected for model evaluation with the guide of simple payback period to determine the cost of energy and feasible FIT rates under several scenarios involving different capital rebate percentages, loan down payment percentages, and PV system costs. Moreover, to capitalise on the FIT benefits, its impact on the stakeholders beyond the households was investigated in terms of natural gas savings, emissions cutback, job creation, and PV-electricity contribution towards the energy demand growth. The study recommended the introduction of the FIT scheme in the Kingdom of Bahrain due to its considerable benefits through a setup where each household would purchase the PV system through a loan, with the government and the electricity customers sharing the FIT cost.     

Responsive feed-in tariff adjustment to dynamic technology development

This paper reviews the adjustments of the feed-in tariffs for new solar photovoltaic (PV) installations in Germany. As PV system prices declined rapidly since 2009, the German government implemented automatic mechanisms to adjust the remuneration level for new installations in response to deployment volumes. This paper develops an analytic model to simulate weekly installations of PV systems of up to 30 kW based on project profitability and project duration. The model accurately replicates observed market developments and is used to assess different adjustment mechanisms against multiple scenarios for PV system price developments. The analysis shows that responsive feed-in tariff schemes with frequent tariff adjustments and short qualifying periods reach deployment targets most effectively.     

Support schemes and vertical integration—Who skims the cream?

This paper examines how the effectiveness of feed-in tariffs for distributed generators, producing renewable electricity, depends on industry structure, i.e., vertical integration vs. unbundling. A stylized analytical model with a monopolist and a competitive fringe (distributed generators) will be developed to analyze the impact of feed-in tariffs on renewable power production. The vertically integrated monopolist maximizes profits by setting the electricity price for residual demand and a network access charge incurred by the fringe. The fringe receives a fixed feed-in tariff per unit of electricity produced. Under vertical integration, a rise in the feed-in tariff induces the monopolist to raise access charges for fringe firms and skim part of their additional income. This partially offsets the supply increase of the fringe firms stimulated by the feed-in tariff. However, in the case of effective unbundling with an externally set access charge, there is no possibility for the monopolist to extract part of the fringe's profit. Then, the feed-in tariff fully accrues to the competitive fringe, and its supply will further increase. This setting will be extended to horizontal expansion when the monopolist also enters the renewable production segment. The effects on prices and output will be derived and compared.     

Ten years of renewable electricity policies in Spain: An analysis of successive feed-in tariff reforms

Spain has been one of the most successful countries in the public promotion of electricity from renewable energy sources (RES-E), particularly wind electricity. This support has been based on a feed-in tariff (FIT) scheme. Although the basic structure of the system was implemented in 1998, it has been modified in 2004 and 2007. This paper provides an overview of the last 10 years of RES-E promotion in Spain, focusing on the FIT system and analysing the main differences and improvements of the three FIT systems. A political economy approach, which considers the interactions between key stakeholders in RES-E promotion, is used to interpret the actual outcomes of successive FIT reforms and their main design elements.     

Optimal feed-in tariff for solar photovoltaic power generation in China: A real options analysis

The feed-in tariff policy is widely used to promote the development of renewable energy. China also adopts feed-in tariff policy to attract greater investment in solar photovoltaic power generation. This study employs real options method to assess the optimal levels of feed-in tariffs in 30 provinces of China. The uncertainties in CO₂ price and investment cost are considered. A method that integrates the backward dynamic programming algorithm and Least-Squares Monte Carlo method is used to solve the model. The results demonstrate that the feed-in tariffs of 30 provinces range from 0.68 RMB/kWh to 1.71 RMB/kWh, and the average level is 1.01 RMB/kWh. On this basis, we find that the levels of sub-regional feed-in tariff announced in 2013 are no longer appropriate and should be adjusted as soon as possible. We have also identified the implications of technological progress and carbon emission trading schemes, as well as the importance of strengthening electricity transmission. It has been suggested that the Chinese government takes diverse measures, including increasing research and development investment, establishing and improving a nationwide carbon emission trading scheme and accelerating the construction of electricity-transmission infrastructure, to reduce the required feed-in tariff and promote the development of solar photovoltaic power generation.     

Investment appraisal of a small, grid-connected photovoltaic plant under the Serbian feed-in tariff framework

Serbian government has recently introduced the system of feed-in tariffs for electricity generated from renewable sources. The proposed feed-in tariff for photovoltaic electricity is set to 0.23 €/kWh paid for 12 years, with the PV electricity produced after the first 12 years being sold at the grid electricity market price for the rest of the plant lifetime. Although such FIT could have been justified by the small, average retail grid electricity price of just 0.054 €/kWh for Serbian households, the investment appraisal of a real case of 2.82 kWp PV power plant in two Serbian cities of Zlatibor and Negotin, clearly illustrates that the proposed FIT framework is not sufficient to attract investments into PV in Serbia. In the second part of the paper, we have analyzed alternative, more reasonable feed-in tarrif frameworks, with the goal of selecting those able to sustain the PV adoption and diffusion in Serbia.     

GIS-based approach for potential analysis of solar PV generation at the regional scale: A case study of Fujian Province

Spatial variation of solar energy is crucial for the estimation of the regional potential and selection of construction location. This paper presents a case study of using high resolution grid map of solar radiation combined with the other restriction factors to evaluate the comprehensive potential analysis of solar PV generation at the regional scale, in order to present a framework of decision support tool for solar energy management in a regional area. The cost of PV generation is calculated based on the geographical distribution of technical potential. Moreover, geospatial supply curve (GSC) is employed to portray the evolution of available potential of photovoltaics (PV) generation with the increase of the generation cost. By integrating the economic evaluation variables of net present value and simple payback period, grid-based economic feasibility of PV generation project is then carried out under two feed-in-tariff scenarios. Finally, total CO₂ reduction potential and its spatial distribution in the study area are calculated. The results confirm that PV technology provides high potential for roof-top application and large-scale PV stations. Additionally, determining a reasonable feed-in tariff is essential for expanding the application of solar PV energy. The findings improve understanding of regional renewable energy strategies and the supply/demand assessment.     

Retail price effects of feed-in tariff regulation

The feed-in tariff regulation is the widest spread instrument used to promote electricity generation from renewable energy sources in the EU, with the costs of resources devoted to this promotion usually being borne by final consumers. Two components of the electricity retail price are expected to be influenced by the feed-in tariff regulation: the incentive to those firms producing electricity from renewable energy sources and the wholesale price of electricity. In this study we analyze the effects that the feed-in tariff regulation has on the electricity retail price for industrial consumers. We estimate the relative intensity of the impact of the cost of support electricity generation under the feed-in tariff and the electricity wholesale price on the Spanish industrial retail price. Special attention is devoted to technology-specific considerations, as well as short and long run effects. The results show that there is not a strong link between the retail and wholesale market for Spanish industrial consumers. Moreover, the results indicate that an increase of solar generation leads to a higher increase in the industrial retail price than in the case of a proportional increase of wind generation. This suggests that, when evaluating the feed-in tariff regulation impact on the retail price, the cost of incentives effect prevails over the wholesale price effect, and this is stronger for solar than for wind generation.     

The impact of the German feed-in tariff scheme on innovation: Evidence based on patent filings in renewable energy technologies

Over the last two decades, feed-in tariffs have pushed the massive expansion of electricity from renewable energy sources in Germany. Between 1991 and 1999, feed-in tariffs were prescribed through the Electricity Feed-in Law – the so-called Stromeinspeisungsgesetz (SEG) – at relatively moderate rates. From 2000 onwards, the SEG was replaced by the Renewable Energy Sources Act – the so-called Erneuerbare-Energien-Gesetz (EEG) – with much higher subsidy rates. The rise in subsidies to renewable power generation under the EEG came along with a substantial increase in electricity prices provoking an intense public debate on the benefits of renewable energy promotion. In our regression analysis, we assess one popular justification for feed-in tariffs: the demand-side effect of induced innovation. We find that the innovation impact of the German feed-in tariff scheme over the last two decades supports the positive innovation hypothesis. However, the inducement effect of the feed-in tariff scheme under the EEG is not significantly different from that of the SEG. Given the drastic cost of the EEG, we caution against the appraisal of the EEG feed-in tariff scheme solely on the grounds of its impact on technological innovation.     

Variability reduction through optimal combination of wind/wave resources – An Irish case study

This study presents a methodology to assess the possible benefits of the combination of wind energy with the still unexploited, but quite significant in Ireland, wave energy. An analysis of the raw wind and wave resource at certain locations around the coasts of Ireland shows how they are very low correlated on the South and West Coast, where the waves are dominated by the presence of high energy swells generated by remote westerly wind systems. As a consequence, the integration of wind and waves in combined farms, at these locations, allows the achievement of a more reliable, less variable and more predictable electrical power production. The resulting benefits are particularly clear in the case of a relatively small and quite isolated electrical system such as the Irish one. Here, in fact, high levels of wind penetration strongly increase the requirement of surplus capacity and cause a much lower efficiency for conventional thermal plants.     

Where do all the windmills go? Influence of the institutional setting on the spatial distribution of renewable energy installation

Promoting renewable energy sources is one policy response to climate change. Not only is there currently a debate over the best policy instrument, it is also discussed whether the renewable energy production should be expanded centralized at locations with the highest production potential or decentralized close to load. It is yet not fully understood what influences the spatial distribution of renewable energy installation.I assess the effect of subsidy scheme and market design on the spatial distribution of wind energy installations by comparing (a) feed-in tariffs versus market premiums and (b) uniform versus nodal pricing. The analysis is based on theoretical considerations and using a six-node test model that reflects the consumption and renewable resource distribution in several countries and regions.The institutional setting has great influence on the spatial distribution and resulting system costs. With uniform pricing, a market premium only leads to a more decentralized expansion of renewable energy production than a tariff when sites share similar wind conditions. Spatially more distributed expansion of wind power performs better in terms of total costs and share of wind power in final demand when networks are restricted.     

Parametric cost–benefit analysis for the installation of photovoltaic parks in the island of Cyprus

In this work a feasibility study is carried out in order to investigate whether the installation of large photovoltaic (PV) parks in Cyprus, in the absence of relevant feed-in tariff or other measures, is economically feasible. The study takes into account the available solar potential of the island of Cyprus as well as all available data concerning current renewable energy sources (RES) policy of the Cyprus Government and the current RES electricity purchasing tariff from Electricity Authority of Cyprus. In order to identify the least-cost feasible option for the installation of 1 MW PV park a parametric cost–benefit analysis is carried out by varying parameters such as PV park orientation, PV park capital investment, carbon dioxide emission trading system price, etc. For all above cases the electricity unit cost or benefit before tax, as well as after-tax cash flow, net present value, internal rate of return and payback period are calculated. The results indicate that capital expenditure of the PV park is a critical parameter for the viability of the project when no feed-in tariff is available.