The impact of applying different metrics in target definitions: lessons for policy design

Abstract

The objective of this paper is to analyse the impact of the use of different metrics in the EU renewable energy target definition. The analysis, using a case study of the Dutch renewable energy support for illustration, reveals that a target based on primary energy would have led to a ranking in which renewable electricity options would predominantly have been considered cheaper for realizing the target. As a primary energy-based target is more closely linked to overarching objectives of the EU Renewable Energy Directive, such as climate change and energy security, this implies that the least cost realization of the current final energy-based target does not necessarily lead to the least cost mix for reducing CO2 emissions or avoiding fossil primary energy. The Dutch case study also shows that the budget allocation in favour of renewable heat and gas options was not only a direct consequence of the final energy-based target but also because of the limited annual budget available for support in the analysed period. With the increase of the support budget since 2013, the budget allocation between the renewable energy categories has become more balanced. Lessons for policy design are provided by highlighting the importance of side-effects which are often insufficiently recognized in the design stage of targets. In the case of the EU renewable energy target, the choice for a final energy-based target did, on the one hand, not consider the consequences for least cost target achievement (negative side-effect), but on the other provided an incentive to pay more attention to renewable heat (positive side-effect).