Combining Tariffs, Investment Subsidies and Soft Loans in a Renewable Electricity Deployment Policy

Abstract

Policy combinations and interactions have received a considerable attention in the energy policy realm. The aim of our working paper is to provide insight on the cost-effectiveness of combinations of deployment instruments for the same technology. A financial model is developed for this purpose, whereby feed-in tariffs (FITs) and premiums (FIPs) are combined with investment subsidies and soft loans. The results show that combining deployment instruments is not a cost-containment strategy. However, combinations may lead to different inter-temporal distributions of the same amount of policy costs which can affect the social acceptability and political feasibility of renewable energy support.

Keywords: renewable energy, policies, combinations, cost-effectiveness, feed-in tariffs

JEL Classification: H81, L51, Q48