Network externality perspective of feed-in-tariffs (FIT) instruments—Some observations and suggestions

Abstract

Existing energy policy frameworks revolving around the acceleration of deployment 1 1 Again, we are only concerned with deployment rather than innovation or invention aspects of renewable energy ( Grubb et al. 2008a). of renewable energy technology can be broadly classified as the quantity vs. price approach. With this brief viewpoint, this paper suggests another perspective of viewing these instruments in terms of a more fundamental basis: whether the deployment in capacity is in terms of a cost minimization approach or a network externality approach. We suggest that the generic price or feed in tariff (FIT) approach in subsidizing renewable electricity generation and associated income would create a bandwagon or self-propagation effect among users rendering the renewable energy technology spreads like a software or information technology. Our objective is to raise awareness of this technology dynamics oriented perspective in renewable deployment supplementing the conventional installation subsidies perspective. We hope that it would inspire more empirical works and studies relating to the policy implications of this viewpoint.