Abstract
This study analyzes the effects of a feed-in-tariff (FIT) scheme’s transition on renewable energy investments. We model an individual’s investment decisions as a public goods game where the FIT scheme’s purchasing price acts as a subsidy that lowers the individual’s investment cost. Using a laboratory experiment, we study the effects of a decreasing purchasing price by comparing it to a counterfactual situation where the FIT scheme is not introduced. Although a high purchasing price induces higher investments, this external incentive seems to crowd out an individual’s intrinsic motivation: when the purchasing price decreases to zero, an individual’s investments are lower than they are in the counterfactual situation. Considering the possibility that motivation crowding out has occurred during the FIT phase-out process, it is important to introduce a new policy instrument without a break to stimulate renewable energy investments.
Highlights
The proliferation of renewable energy, such as solar, hydro, wind, and geothermal, is essential for building a sustainable society
As the latter examples show, the FIT system was initially a policy to encourage the growth of renewable energy and enable competition with other electric power generation sources, many countries are lowering the purchasing price and abandoning the FIT scheme even before the investment cost decreases
This study contributes to the subject by conducting an experiment on renewable energy investment under conditions closer to the current FIT policy and observes motivation crowding out when FIT prices are removed
Summary
The proliferation of renewable energy, such as solar, hydro, wind, and geothermal, is essential for building a sustainable society. To avoid the large payments, the Korean government changed its policy from FIT to a Renewable Portfolio Standard The latter policy obliges power companies to cover a certain ratio of their power generation with renewable energy (Mendonça et al, 2010). As the latter examples show, the FIT system was initially a policy to encourage the growth of renewable energy and enable competition with other electric power generation sources, many countries are lowering the purchasing price and abandoning the FIT scheme even before the investment cost decreases. The FIT purchasing price starts at a high level and decreases to zero.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
