Analysing the Impact of Renewable Energy Regulation on Retail Electricity Prices

IEB Working Paper 2016/19

36 Pages Posted: 18 Sep 2016

See all articles by Pablo del Rio

Pablo del Rio

Spanish Council for Scientific Research (CSIC)

Pere Mir-Artigues

University of Lleida - Department of Applied Economics

Elisa Trujillo-Baute

University of Warwick

Date Written: September 7, 2016

Abstract

Retail electricity prices have substantially increased in the last decade in the European Union (EU) as a result of different regulations, raising the concern of policy makers. The growth in the support costs for electricity from renewable energy sources (RES-E) has often been singled out as a main driver of these prices. The aim of this paper is to analyse the degree of influence of RES-E promotion costs on the evolution of the retail price of electricity in the EU Member States. The analysis is carried out for households as well as for industry, with the help of a panel data econometric model. Our results show that the impact of renewable energy promotion costs on the retail electricity prices is positive and statistically significant, although relatively small. Differences across consumer types can be observed. An increase of 1% in those costs induces an average increase of only 0.023% in industrial retail prices and 0.008% in the residential retail prices. This impact on retail prices is mediated by the type of support scheme being adopted, with price-based support instruments showing a greater effect than quantity-based ones.

Keywords: Electricity prices, renewable energy, public support

JEL Classification: L11, Q41, C24

Suggested Citation

del Rio, Pablo and Mir-Artigues, Pere and Trujillo-Baute, Elisa, Analysing the Impact of Renewable Energy Regulation on Retail Electricity Prices (September 7, 2016). IEB Working Paper 2016/19. Available at SSRN: https://ssrn.com/abstract=2838881 or http://dx.doi.org/10.2139/ssrn.2838881

Pablo Del Rio

Spanish Council for Scientific Research (CSIC) ( email )

28006 Madrid
Spain

Pere Mir-Artigues

University of Lleida - Department of Applied Economics ( email )

Campus de Cappont
Jaume II, 73
Lleida, Lleida 25001
Spain

Elisa Trujillo-Baute (Contact Author)

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

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