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Title:Quantities vs. capacities: Minimizing the social cost of renewable energy promotion PDF Logo
Authors:Andor, Mark
Flinkerbusch, Kai
Voß, Achim
Issue Date:2012
Series/Report no.:CAWM Discussion Paper, Centrum für Angewandte Wirtschaftsforschung Münster 59
Abstract:In this article we show how different promotion schemes for renewables affect economic welfare. Our starting point is that external benefits of renewable electricity supply besides the abatement of greenhouse gases are not related to actual electricity generation but to producing and installing capacity. We argue that generation based subsidies such as feed-in tariffs and bonus payments can only be a second-best solution. Our model framework allows us to explain how these second-best instruments cause welfare losses in an environment of volatile demand. We postulate that capacity payments for renewables should be implemented in order to avoid unnecessary social costs.
Subjects:Renewable Energy Sources
Energy Policy
Promotion Instruments
JEL:Q41
Q48
H23
Document Type:Working Paper
Appears in Collections:CAWM Discussion Papers, Universität Münster

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