Robustness of Renewable Energy Support Schemes Facing Uncertainty and Regulatory Ambiguity

Abstract

Renewable portfolio standards, feed-in-tariffs, and market premia are widely used policy instruments to promote investments in renewable energy sources. Regulators continuously evaluate these instruments along the main electricity policy objectives of affordability, reliability, and sustainability. We develop a quantitative approach to assess these policies and their robustness to exogenous changes along these dimensions using a long-term dynamic capacity investment model. We compare their robustness in the light of uncertain renewable feed-in and ambiguous future regulation. We implement the robustness analysis employing different risk measures and find that renewable portfolio standards deliver most robust results, while feed-in-tariffs achieve target renewable buildup rates at least cost.

Keywords: Renewable portfolio standards, Feed-in-tariffs, Power generation, Scenario reduction

JEL Classification: Q4, Q2, L9, L5