Robustness of Renewable Energy Support Schemes Facing Uncertainty and Regulatory Ambiguity

38 Pages Posted: 13 Sep 2014

See all articles by Ingmar Ritzenhofen

Ingmar Ritzenhofen

WHU - Otto Beisheim School of Management

John R. Birge

University of Chicago - Booth School of Business

Stefan Spinler

WHU-Otto Beisheim School of Management

Date Written: September 12, 2014

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

Suggested Citation

Ritzenhofen, Ingmar and Birge, John R. and Spinler, Stefan, Robustness of Renewable Energy Support Schemes Facing Uncertainty and Regulatory Ambiguity (September 12, 2014). Available at SSRN: https://ssrn.com/abstract=2495278 or http://dx.doi.org/10.2139/ssrn.2495278

Ingmar Ritzenhofen (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

John R. Birge

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Stefan Spinler

WHU-Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
+49-261-6509430 (Phone)

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