Increasing the effectiveness and efficiency of renewable energy support policies in the European Union

Abstract

The thesis discusses the effective and cost-efficient design of renewable energy sources (RES) support policies in the European Union along some major discussion lines of the European RES policy debate: the effectiveness of the different national support policies in the member states the cost savings potential of different cost reduction policies for reaching the 2020 RES target the role of market risk exposure and market integration for RES deployment and the cost-efficiency of RES support the role and design of cross-country cooperation mechanisms for efficient RES target achievement. The analysis showed that the effectiveness and efficiency of RES support policies is still low in many European member states but that top runner countries have gained significant experience in tailored RES policy design. The key recommendations for improving the effectiveness and efficiency of RES support policies across Europe are: Reducing policy and market risks, particularly those that have no or little potential to trigger cost-optimised behaviour of RES generators Ensuring long-term commitment and increasing the stability of the regulatory framework for RES Against the background of the risk-averse financial environment and the new budgetary constraints of the recent financial crisis, it has become even more important for governments to take measures to reduce RES financing risks. Without such risk reduction, it seems unlikely that sufficient investments will be attracted to reach the EU 2020 targets. Furthermore, stable and risk sensitive policies could reduce the policy costs for achieving the target by up to 4 billion Euro per year. In addition to improving the effectiveness and efficiency of their national support instruments, policymakers should consider the increased use of cooperation mechanisms that could potentially further decrease the cost of European RES target achievement by 2-3 billion Euro per year, at least if the respective cooperation mechanisms do not introduce additional risks and uncertainties. From the analysis in this thesis, it appears that bottom-up cooperation between member states and alignment of regulatory frameworks according to best-practice criteria is a more promising approach than drastic harmonisation measures that will unsettle the market and require another learning period to improve their effectiveness and efficiency. We have seen that RES policy design has gone through a phase of intense policy learning in the last decade. For the more advanced countries, effective and efficient policy design is an increasingly complex issue that requires individual and fine-tuned approaches. The question remains how the countries whose RES markets are lagging behind can be motivated to learn from this process and to improve their support policies and regulatory frameworks despite the existing economic constraints.