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Honors Thesis
21 December 2009
energy savings, is the only realistic, effective and viable solution for dealing with climate
1.1 Introduction
In recent years, the upward trend of fossil fuel prices and mounting evidence of
(E.U.) to confront a burgeoning global crisis at the intersection of energy security and
climate change. With the adoption of Directive 2001/77/EC in 2001, the European
meeting its long term energy objectives and fulfilling its Kyoto obligations. In 2008, the
E.U. Parliament adopted a climate package which included a RES directive with the
political aim of generating 20% of the E.U.’s total electricity generation from RES by
setting specific RES targets for each member state (MS).1 Due to the presence of several
market and institutional obstacles, such an ambitious objective can be fulfilled only with
the enactment of national support schemes that can stimulate the nascent RES market. In
the E.U., the two predominant RES support schemes used among MS are the green
certificate system (GCS) and the feed-in tariff (FIT). Even though both support schemes
have demonstrated some degree of success, I will outline the success of Germany’s
argue that the FIT is a more effective policy instrument in expanding the RES market on
the basis of two overarching criteria: economic effectiveness and ecological efficiency.
technologies? What is the most effective national support scheme that can be employed
in the E.U.? What is the central problem concerning the widespread diffusion of green
The E.U. cannot pursue a low-carbon, economic growth trajectory without the
that enable producers to efficiently harness the power of wind, solar, geothermal, and
other RES for the generation of low-carbon electricity (green electricity). However, such
green technologies cannot be widely adopted in the short term under current market
conditions due to the various obstacles that hinder the long term and complex process of
technological innovation.
Joseph Schumpeter recognized the three distinct stages of the innovation process:
throughout the market.”4 Nevertheless, this process is not linear but follows an iterative
path that is “linked by learning and feedback that flow both ‘downstream’ from research
to design and develop, and ‘upstream’ from the development process to fundamental
research.”5 This perspective illuminates the learning that takes place by the innovators of
technological breakthroughs are not as economically significant as the long term series of
incremental improvements that are undertaken to reach a cost-effective product that can
attract consumers and investors.6 Historical examples of this observation are the
transistor and the gas turbine, in which both technologies were developed over the course
of many years—initially with the support of the public sector, and then, further enhanced
participants are responsible for driving the innovation process of conducting research and
If there is difficulty in any stage of the innovation process, investors will be very
reluctant in providing the necessary funding for the R&D activities due to the high
associated risk. In the energy sector, market actors encounter several market and
institutional barriers which hinder the acceleration of the innovation process. These
obstacles mainly revolve around the difficulties in penetrating the electricity generation
learning process in production for new entrants in the electricity market. Since electricity
niche market and then expand to the broader market of end-users. Therefore, the RES-
harnessing technologies must directly compete against the more cost-competitive and
reliable incumbent technologies. Historical experience has shown that infant RES
technologies cannot compete in such an environment during the initial phase of market
entry and that decades are required before dynamic increasing returns emerge such as
“economies of scale and learning effects, which can lead to costs falling as production
increases.”8
The second obstacle lies with the nature of national electricity grids. Since the
electrical grids of MS are designed for the accommodation of conventional power plants,
investors confront severe difficulties in attracting capital funds for RES electrical
systems. First, if the proposed construction sites of RES electrical systems are located far
away from the electrical grid, then the utilities cannot provide access to RES producers.
In addition, the current electrical grids are usually not equipped to receive electricity from
multiple independent producers. Unless the electrical grids are restructured to absorb
green electricity from RES producers, the current status quo in electric power distribution
cannot be changed.
The third obstacle is centered on the current market distortions due to government
subsidies on existing fossil fuel technologies. The estimated subsidy for fossil fuels is
$150-250 billion per year globally.9 With such considerable support from the
government, utilities hold a competitive advantage in the energy sector and strive to deter
the entry of any potential competition. In the absence of government regulation (e.g. cap
and trade scheme or carbon tax), utilities hold a strong position because they are not
into their cost structures. Given the fact that conventional power is more cost-
competitive, RES technologies cannot become a viable option in the short term, and thus,
The fourth obstacle focuses on the market structure of the energy sector.
Generally, the electricity market is highly regulated and there is a limited number of
competing firms. For example, the French firm Électricité de France is the world’s
largest utility company, the dominant electricity provider of France, and the supplier of
22% of the E.U.’s electricity. The large utilities within this oligarchic structure tend to be
risk averse and predominantly use conventional fuels to generate electricity because
adopting new technologies may prove to be more costly or less reliable. Therefore, the
drive to innovate is negligible and there is a tendency for the status quo to remain.
Even though the private sector is the principle agent in technological innovation,
the public sector can play an essential role in driving private spending until a certain
threshold is reached—to the point at which public funding begins to “crowd out” the
entry of private investment. If there are sufficient flows of private capital to the
development of a specific technology, then the government can withdraw its support
because the private sector can further advance the technology to maturity without the use
of public funds.
The role of public-sector R&D is also very important in maintaining the “public
good nature of major scientific advances1”. The government has historically been
successful in spearheading innovative activities that offered unexpected benefits for other
applications. For instance, the diffusion of knowledge from military R&D to civilian
obtained in constructing World War II bombers and tankers for the U.S. Air Force in its
commercial designs and tooling for the 707.11 Specifically, the energy sector has
benefited from military R&D, the U.S. space program, and other sources of knowledge
such as the development of the gas turbine. Originally designed to propel a military jet
aircraft, the gas turbine is also used to power many electric power plants. These examples
“highlight the spillover effect that occurs between sectors and the need to avoid too
is a necessary step towards the aim of building a strong technological research base that
can stimulate the RES market. If the government expects scientific institutions and
adequate allocation of public funds for their education and to the R&D firms that employ
them. To this purpose, the government will strongly contribute to the stimulation of the
RES sector by deterring any potential volatility that may discourage private investment.
As evidenced above, market actors do not only respond to price signals in the
market in order to maximize profits, but also adjust their market behavior to signals from
the government13. Without the presence of a national support scheme to support the
development and deployment of green technology, the current market dynamic and
regulatory framework does not provide the sufficient economic incentives for market
actors to undertake such innovative activities, especially with the urgency and scale
necessary to meet the E.U.’s indicative targets by the year 2020. The following diagram
Since the E.U. did not prescribe a specific support scheme to achieve its RES
directive, each MS has selected a national support scheme that can overcome the
Presently, two major support schemes have emerged: “the older and more widely used
feed-in tariff (FIT) schemes on the one hand and the newer but increasingly popular
tradable quota models, referred to ‘green certificates’ (GC), on the other hand.”14
component of the law refers to the fixed price received by the producer for any kWh of
costs, resource endowments, and industry lobbying. With regard to financing the
legislation, the FIT applies the costs of the tariffs to the end users of the utility
companies.
consumers to either produce or buy a certain amount of green electricity (in absolute
values or quota).”16 In its simplest form, the GC system the government imposes the
certain time period (usually 1 year). In addition, the GC systems are usually
their quota obligation: either to produce the green electricity themselves or to purchase
The two criteria that will be employed in the comparison analysis between these
two support schemes are economic efficiency and ecological effectiveness. Economic
efficiency will be defined as the relative cost of this policy option as compared to other
support schemes and the absence of government intervention. The greatest level of
economic efficiency will entail the lowest possible cost of the support scheme to the body
politic.
deployment—ranked first in terms of installed capacity for wind energy and second for
photovoltaics (PV).18 Even though other countries have more favorable resource
endowments such as Italy, Spain, and Greece for solar energy and Scandinavia and the
UK for wind energy, Germany has exceeded the rest of Europe in RES deployment due
Since 1979, in the wake of the first oil crisis in 1974, Germany has been
enhancing its FIT legislation at the behest of the German Bundestag and the German
people at large. Introduced in 1990, the first fully formed modern feed-in law in
electricity producers from small hydropower stations and wind energy installations.
After several modifications, the German government adopted the Erneuerbare Energien-
Gesetz (EEG and also known as the 2000 Renewable Energy Sources Act), which
policy.”19 The EEG was instrumental in the success of Germany’s FIT mechanism
on the renewable energy type, size, and site.”2 Furthermore, the EEG expanded the range
of technologies that were supported by tariffs and the StrEG’s tariff percentage-based
rates were replaced with fixed rates over a set period of twenty years of operation for
each new RES electrical system. In 2004, the EEG was amended and its new provisions
called for the increase of the contribution of green electricity in the total electricity supply
to 12.5% by 2010 and catalyzed a boom in the solar industry by raising its respective
tariff. Last, a new concept of tariff rate digression was introduced for the different RES-
based technologies.
The features of the EEG and its attendant amendment have far-reaching
obstacles.
The problems associated with the learning process are overcome with the
implementation of the EEG because the tariff is fixed and guaranteed over a specific
period of time (20 years) which ensures the profitability of the investment for producers
and a stable investment environment for manufacturers, financers, and suppliers. With
the guarantee that household and industrial producers are guaranteed a premium and
sustained price for green electricity, market demand is created and industry responds with
dynamic is that lenders are inspired to offer favorable loans to consumers willing to
expectations and the guarantee of concrete incentives create the conditions that are
scale and the acceleration of the learning process. In the case of Germany, the price of
photovoltaic systems has decreased by more than 20% since 1999 because new products
are facilitating the mounting of such systems, economies of scale are reducing the
manufacturing costs of equipment, and the growing experience of dealers and craftsmen
upon the utilities to connect RES producers to the electrical grid and to transmit the green
electricity to consumers. This requirement leads to the restructuring of the grid in order
to accommodate the influx of multiple RES electrical systems as compared to the current
addition, the transmittance of the green electricity through the grid will increase the total
supply of electricity and thereby reduce the demand for electricity produced by
The third obstacle of market distortion can be cleared with the shifting of
adequate domestic supply, to reduce energy prices, and to promote job creation. In fact,
the history of coal, oil, natural gas, and nuclear power demonstrates that no energy sector
was developed without the use of subsidies.22 In the case of the U.S., the government has
distributed $74 billion to fund the R&D for conventional and nuclear power from 1973 to
2003 whereas only $26 billion was spent on RES technologies and energy efficiency.23
Specifically, recent research has shown that even though the U.S. nuclear and wind
technology produced roughly the same amount of energy, the subsidy to nuclear
outweighed that to wind by a factor of over forty24. But in the case of the E.U., a lower
proportion of generation capacity has been in the private sector. Hence, a different form
of support has been granted to the formerly state-owned firms that are still benefitting to
the present-day, which includes infrastructure, R&D, capital investment, and subsidized
operating costs.25 Therefore, the EEG has succeeded in leveling the playing field by
facilitating the penetration of RES technologies into the market in order to compete
The fourth obstacle is resolved by the EEG indirectly by the measures mentioned
above. Essentially, the government establishes the framework in which RES deployment
can occur. In doing so, the broader interest of society supersedes the narrow interest of
the utilities.
As stated in Section 1.7, economic efficiency is defined as the relative cost of this
policy option as compared to other support schemes and the absence of government
intervention. The policy option with the highest level of economic efficiency compared
The societal costs can be differentiated between the costs to consumers and
effectiveness criterion.
The costs to producers will be grouped with the investment risk of investors
because the majority of the economic burden in both support schemes is passed onto the
end user. In the literature reviewed for this thesis, there have been no findings of data
that attempted to measure the costs incurred by the utilities, the transmission operators,
and the capital investors. For this reason, I have adopted the standard used by the
Climate Change Advisory Group of Deutsche Bank in order to assess the attractiveness
longevity, and certainty. Transparency is defined as the ease in which investors can
correspondence between the investment horizon and the policy timetable. Investors seek
the confidence that a RES support scheme will retain the support of the government and
the public to remain operational. And last, the notion of certainty involves the capability
to precisely calculate the future cash flows of an investment given the market and
institutional conditions.
The costs to consumers will be accounted for by an analytical approach and the
university research studies. Although there are different technology-specific tariff rates
that could have been employed in this comparison, I mainly focused on wind and solar
because these RES have seen the highest rates of growth. The major statistic that is used
in this comparison is the cost of the tariff per household for a given RES-based
technology.
The green certificate system creates a quota requirement of property rights to the
established by the government oversees the purchasing, selling, and trading of these
determined by the costs associated with the generation of green electricity. When the
producer generates electricity from RES instead of the less costly conventional sources,
the certificate’s value on the market should cover the producer’s incurred loss—in
accordance with theory. The GC system separates the market for electricity (commodity)
from the market for certificates (rights to environmental benefits). Economic efficiency
is maximized because producers are allowed to make rational decisions in how they will
The producers are given the option of either generating green electricity through their
own means or they can purchase the certificates from other producers.
However, in reality, the producers and investors are faced with uncertainty in
determining the best course of action due to the fluctuation of the price of the certificates,
which depends on different factors such as the location of the facility producing the green
electricity and the type of RES electrical system.27 The empirical data provides evidence
that even though the GC system has seen considerable success in MS at the beginning of
the decade, it currently encounters severe difficulties due to the high level of investment
Furthermore, with regard to producers and investors, the rules of the certificate
market call for the drafting of bi-lateral contracts to settle the terms of the purchasing and
selling of certificates28. Such agreements are conducted on a case-by-case basis and the
price of the certificates is determined by laws of supply and demand. However, the
drafting of these bilateral agreements, in accordance with free market principles, creates
costs. Therefore, there is “very little transparency or certainty going into the
negotiation”29. The following diagram demonstrates the suite of external factors that
Last, the nature of electricity does not permit its storage. In order to respond to
price signals, utilities need to install new generation capacity that may take from one to
five years to commission. This feature of the industry produces further uncertainty in
both the electricity and the certificate markets in the form of volatile prices and illiquid
With regard to consumer costs, the findings of the International Energy Agency
(IEA) have demonstrated new evidence that contradicts the prevalent claim that GC
systems are less costly than FIT mechanisms. The IEA research revealed that the GC
systems are more costly to consumers than the FIT. In the portion of the report focusing
on on-shore wind power, the research team suggested that only fixed tariffs above a
specified price can catalyze a specific RES market: “a minimum level of remuneration
deployment effectiveness”3.
The report proceeded to reveal that the leading countries in wind power
GC systems (USD .13-.17/kWh). This blaring discrepancy can be explained by the fact
that beyond a certain price ceiling, the degree of policy effectiveness is not necessarily
The cases of Italy, Belgium, and the United Kingdom and their use of GC systems
provide further evidence of this theory because even though these countries provide the
highest level of remuneration for wind power, none of these countries scored high levels
countries fail to promote their respective RES sectors? The report identifies two leading
factors that discouraged the use of green technologies: “non-economic barriers and
In the case of the EEG and its feed-in tariff mechanism, the German regional or
national transmission system operators are obligated to feed in the full generation of
RES technology. The price of the fixed tariff rates are agreed upon using a transparent
equation, and thus, are less vulnerable to fraud, manipulation, and volatility. The costs of
this support scheme are also borne by the end users; however, the economic burden for
the consumer under the conditions of a FIT mechanism is more predictable than the GC
system.
The German government has set a fixed tariff rate for each eligible green
technology. Every two years, regulators assess the capacity installation of each
technology and calibrate its respective tariff rate in accordance with a specified growth
trajectory. For example, the yearly energy produced by the German wind power sector is
approximately 40,000 GW h with an average tariff rate of about .07 Euros for every
kilowatt per hour. If the objective is to generate 50,000 GW h by the year 2030, the
German government will assess the expansion of wind power generation every two years
and calibrate the tariff rates to achieve moderate and sustained growth. In this way, an
accurate prediction of the total costs to the end user can be determined. For instance, the
monthly cost per household to fund the FIT for solar energy only averages about 3 Euros
in 2008.32 Albeit the higher relative costs of the FIT mechanism (e.g. up to .65/kWh for
solar photovoltaic systems), the economic burden of the support scheme can be easily
determined every year and an accurate prediction of future costs can be determined.
However, the most important implication of the FIT is that its transparent price
calculation provides a higher quality bundle of incentives for investors. The effect of
providing stable expectations for the investment period is evident in the remarkable
comparative analysis conducted by the University of Palermo, the FIT mechanisms in the
countries of Germany, France, Spain, and Italy have led to pay-back-periods of under 19
years. In the case of Germany, the EEG has provided the following statistics that guide
flows, which will equal the total amount of time that is required in order to cover the
initial investment. In the German RES market, a household or utility is guaranteed that
the installation of a RES electrical system will pay for itself no later than 19 years. In
addition, the internal rate of return represents the discount rate that is used in capital
budgeting that will set the net present value of a project’s cash flows equal to zero. In the
case of Germany, the internal rate of return indicates that an investor covers the costs of
the initial capital investment, and also earns a premium bonus of approximately 3%.
systems33, the EEG provided the best stimulus for growth among the four leading
countries. This figure represents the category of RES energy projects that are funded in
part by local landowners and community members in the rural areas of Germany. A
has democratized the local supply of electricity for many German towns and has highly
Furthermore, the FIT has an economic advantage over the GC system because it
the consumer decides to take out a low-interest rate loan and to install an independent
RES power generator, then the rate of return the RES electrical system will accrue can
cover the annual costs of the FIT. It may be the case that under a FIT mechanism, the
total economic costs to the consumer are greater than the GC system, but even so, the
economic burden under a FIT is not only more predictable, but also it can be mitigated
One of the major weaknesses in the FIT, with regard to consumer costs, has been
corrected during the initial phase of its implementation. Ringel identified this flaw in
with a high share of renewable in their operation area and operators with having
practically no green power producers to deal with, consumers were caught and simply
portion of wind power whereas the operators in southern Germany had considerably less
green electricity generation. However, the German government solved this problem by
implementing a compensation scheme that distributed the economic costs of the FIT
promote the greater amount of installed capacity of green electricity over the FIT
mechanism. However, consulting the empirical evidence of recent years will reveal the
multiple counterexamples that clearly signify an overriding trend that FIT tariffs are, in
fact, more effective in expanding RES generation capacity (Appendix 1). For example,
the “surge of wind energy in the E.U. has clearly taken place within countries that
selected the FIT as their national support scheme35”. The countries of Germany,
Denmark, and Spain surpass the E.U. 15 average by at least 2,000 GWh; however, the
to the E.U. 15 average. The only difference between the Netherlands and the other three
countries is that the Netherlands does not obligate transmission operators to take green
each feature of a well-designed FIT because the other factors would most likely not
generation, accounting for 47% of the world’s new PV generation capacity in 200736. In
terms of generation capacity, Germany installed 1.1 GWp in 2007, which elevates the
total photovoltaic capacity to 3.8 GWp. Accordingly, economists are predicting that this
growth rate will have a high impact on other major markets such as Spain, Italy, France,
Greece, Japan, and the US, particularly because the PV industry is expecting
within its country of jurisdiction. If the E.U. does not promote a high level of diversity
among RES technologies within the energy sector, then it will fail to achieve its long
term energy objectives—namely, to achieve energy supply security and to reach its
The objective of energy security will not be reached with the implantation of a
GC system because of its inherent design. Since the price of the certificates is dependent
on supply and demand only, the purchasing party will seek out the certificates that have
been earned with the least cost. As a result, only the most efficient producers will be
better equipped to sell certificates at a more competitive price than less efficient
producers. This element of the GC system appears beneficial on the surface; however,
wind power, hydro, and biomass energy are the only green technologies in the energy
sector that reach efficiency levels that enable producers to competitively sell their earned
certificates and to continue producing green electricity. Under these market conditions,
technologies such as solar photovoltaic will not be able to compete, and thus, will not be
deployed.
The objective of energy security is particularly important for the E.U. because it is
highly reliant on foreign imports of fossil fuels. If the price of fossil fuels fluctuates, then
the E.U. will experience price hikes, possible supply disruptions, and grave economic
losses. In addition, Ringel cites the example of the Brazilian blackouts in 2003 to
demonstrate the danger of generation fluctuations in the case of natural catastrophe. The
Furthermore, the objective of reaching the E.U. indicative RES targets will not be
one or two RES in accordance with their respective resource endowments. For example,
the country of Austria has exploited its mountainous geography to harness the potential
of hydroelectric power, whereas Spain has extensively developed its solar power
generation capacity. Since the further deployment of such RES technologies will incur
rising marginal costs and other difficulties, it will become necessary for the MS to
stimulate the use of additional RES technologies in order to reach their indicative RES
Proponents of the GC system claim that, unlike the FIT and its reliance on
voluntary market participation, the imposition of volume quotas ensures that a RES target
is fulfilled in a timely manner. However, the caveats of this claim are numerous to the
extent that it does not hold true in practice. First, the binding volume target can be
avoided by utilities by accepting the compliance penalties for the failure to generate
green electricity or to purchase green certificates. Second, both support schemes are the
result of political negotiations whose incentives are not guaranteed beyond the provisions
of the legislation. The long term continuation of such programs is of the utmost
support scheme with the greatest and most sustained support from the body politic will
a GC system because it is the least costly and it is more advantageous for large firms with
the resources and leverage to negotiate the bilateral contracts needed for the exchange of
certificates. In contrast, the FIT extends the incentives of the support scheme to any
small community. The FIT mechanism can enable any citizen to install a RES electrical
system and generate green electricity, and thus, the FIT is a more democratic and open
policy instrument. This feature of the FIT increases the likelihood that it can garner
Furthermore, government authorities are “sensitive to the impact that the binding
targets may have on electricity rates and some policies have clauses that explicitly
exempt the utility from compliance if the rate reaches a certain threshold38. Given this
fact, the indicated target may not be definitively binding for the energy sector; but
nevertheless, the costs are borne by the end users in exchange for minimal accrued
benefits.
The overall aim of generating 20% of the E.U.’s total electricity generation from
RES has been “split up into indicative targets for its member states due to different levels
overbearing and the countries with GC systems ease their generation obligations, then
every MS will be negatively affected because the integrity of the indicative RES targets
will be compromised. For this reason, the FIT mechanism is the most ecologically
establishing a cap that may hamper RES growth rates. The primary example of this
proposition is the collapse of the solar market in Spain. Since the feed-in tariff was
stimulating the RES market to the degree that the Spanish government could not
sufficiently fund the program, the authorities imposed a cap. This restriction flooded the
market with participants who did not want to lose the opportunity. This created a further
strain on the Spanish government, and once the cap was reached, the solar tariff ended
and the market imploded soon after. This case is a useful lesson in the importance of
proper FIT design and implementation. Unlike the German FIT, Spain did not pass the
costs on to the consumer and they imposed a cap on the market, which led to drastically
counterproductive results.
countries cannot exploit the agricultural, industrial, and residential products and
has originated in the industrialized “North” whereas the developing “South” confronts
direct investment flows and minimal indigenous research and development (R&D).
Since the developing countries’ total greenhouse gas emissions are exceeding the
On the one side of the debate, U.S., Europe, and Japan are entrenched in the
policy position that IPR protection is not an obstacle, but imperative in encouraging
innovation. Since innovative activities are both costly and risky, market actors must
and entrepreneurs, which can serve as a substrate for further innovation. Proponents
of IPR protect claim that in the absence of IPR protection, the threat of imitation
damages the incentive for any potential R&D. In contrast, the diplomatic coalition of
developing countries, the G-77, represents the antithetical view that the current IPR
welfare of the South. For this reason, India, Brazil, and China have led efforts to
HIV/AIDS epidemic.
options. The optimal course of action is a balancing act between maintaining a strong
incentive for firms to engage in R&D while keeping costs low for new technologies,
especially for their use in developing countries. For this purpose, measures should be
treaties such as the World Trade Organization’s Agreement on Trade Related Aspects
inventors and entrepreneurs will have the confidence to challenge the status quo by
reserve their patents that may lower output and increase costs of the new technology,
which will hinder its deployment. But in the interest of the developing world, mature
and economic welfare among the most vulnerable populations. To avert damaging
the incentive for future R&D, the transferred technologies can constitute information
and products that are behind the technological frontier by at least five years.
Unfortunately, both parties of the debate are entrenched in rigid positions and
the only viable solution may lie with the idea of cooperative international R&D
agencies. Since the majority of innovative activities occur within the private sector,
institution that can allow countries to tap into its knowledge stock and to exploit its
producers of the North and the end users in the South. The most cutting edge
technologies will continue to be developed by free market firms and their profit
margins will not be reduced. In addition, the global clean technology institution can
direct its efforts in meeting the technological needs that are either non-existent in the
can stimulate a learning process that can enable firms in developing countries to
consensus in this essential, but highly under-reported issue in the global climate
change debate. The balance between incentivization of R&D and the fulfillment of
the spirit of multilateralism and cooperation. For this reason, the best resolution to
this debate is to establish an international clean technology R&D institution that can
provide useful environmentally sound technologies to those who stand to benefit the
2.7 Conclusion
This paper started its analysis with an examination of the role of RES-based
technologies in the effort to combat global climate change. In order to answer the
first research question, I provided a background of the technological process and the
intervention is the only means in which these obstacles can be overcome by market
actors.
The research conducted for this paper has determined that public sector R&D
coupled with RES support schemes constitute the only way to achieve widespread
in order to answer the second research question. The GS system and the FIT
The results of my analysis are that GC systems should theoretically be less costly to
society (economic efficiency); however, the empirical record coupled with additional
should also perform better in pursuant to the ecological criterion, however, the FIT
has proven to be the better policy instrument in creating green electricity generation
capacity. In conclusion, this analysis has demonstrated that the FIT is the superior
support scheme in light of the two defined criteria that were used in the qualitative
approach.
strategy of mitigating and adapting to climate change, then the developing world is
entitled to assistance in advancing their technological innovation and adopting the use
of RES electrical systems (especially in light of the fact that the industrialized nations
have historically contributed the majority of greenhouse gas emissions into the
atmosphere). The final resolution to this dilemma between incentivizing innovative
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1
Nicolosi and Fuersch pg. 25
2
Energy industries is a generic term for all of the industries involved the production and
sale of energy, including fuel extraction, manufacturing, refining and distribution
3
Pew Center on Global Climate Change pg. 7
4
Stern pg. 349
5
Pew Center on Global Climate Change pg. 7
6
Pew Center on Global Climate Change pg. 8
7
The four obstacles are derived from the analysis of the Stern Report
8
Stern pg. 350
9
Stern pg. 355
1
Stern pg. 361
11
Pew Center on Global Climate Change pg. 35
12
Stern pg. 361
13
Slater and Tonkiss pg. 124
14
Ringel pg. 6
15
Campoccia, Dusonchet, Telaretti, Zizzo pg. 289
16
Ringel pg. 8
17
Analogous to the notion of emissions allowances in a cap and trade scheme
18
Lauber and Mez pg. 105
19
E-Parliament memorandum pg. 3
2
E-Parliament memorandum pg. 3
21
Stryi-Hipp pg. 4
22
Pernick, Ron and Wilder, Clint
23
Pernick, Ron and Wilder, Clint
24
Goldberg
25
European Environment Agency pg. 16
26
Campoccia, Dusonchet, Telaretti, and Zizzo pg. 288
27
Campoccia, Dusonchet, Telaretti, and Zizzo pg. 289
28
The GC system favors large electricity generators with the resources to engage in
negotiations. This feature also increases transaction costs which are passed on to the
consumer.
29
Deutsche Bank Advisory Report pg. 50
3
Gipe pg. 2
31
Gipe pg. 2
32
Martin pg. 2
33
The term non-integrated photovoltaic systems refers to generators that are not
integrated into the exterior structures of buildings.
34
Ringel pg. 6
35
Ringel pg. 10
36
Modern Power System Magazine pg. 32
37
The experience of recent decades has shown that the cost of PV electricity is reduced
by 20% with each doubling of the total installed volume.
38
Deutsche Bank Advisory Report pg. 52
39
Ringel Pg. 2