Current Support Schemes Research Articles

Estimating the cost of capital for wind energy investments in Turkey

Wind power represents a key component of Turkey's energy strategy. Increased investment will be required to meet Turkey's wind power target and, as such, there is a need to understand the viability of wind power projects there. The cost of capital is a crucial element in wind power investment decisions owing to the high capital intensity of wind power plants. A reduction in the cost of capital through support policies can lower overall project costs and increase investment. We estimate the cost of capital for wind power projects in Turkey using data on 138 installations that participated in the Turkish feed-in tariff scheme in 2017. Our estimates indicate an upper bound of 12% for the cost of capital. This suggests the cost of capital for wind power projects in Turkey is not higher than in south-eastern European Union countries. However, because of adverse macroeconomic conditions, the cost of Turkey's main renewable support scheme increased by 46% between 2016 and 2017 in Turkish lira terms. We argue that continued commitment to the current support schemes by the Turkish authorities is crucial for the development of the Turkish wind power sector.

Effects of changes in Italian bioenergy promotion schemes for agricultural biogas projects: Insights from a regional optimization model

Italy has witnessed an extraordinary growth in biogas generation from livestock effluents and agricultural activities in the last few years as well as a severe isomorphic process, leading to a market dominance of 999kW power plants owned by “entrepreneurial farms”. Under the pressure of the economic crisis in the country, the Italian government has restructured renewable energy support schemes, introducing a new program in 2013. In this paper, the effects of the previous and current support schemes on the optimal plant size, feedstock mix and profitability were investigated by introducing a spatially explicit biogas supply chain optimization model, which accounts for different incentive structures. By applying the model to a regional case study, homogenization observed to date is recognized as a result of former incentive structures. Considerable reductions in local economic potentials for agricultural biogas power plants without external heat use, are estimated. New plants are likely to be manure-based and due to the lower energy density of such feedstock, wider supply chains are expected although optimal plant size will be smaller. The new support scheme will therefore most likely eliminate past distortions but also slow down investments in agricultural biogas plants.

Promoting Second Generation Biofuels: Does the First Generation Pave the Road?

The U.S., Brazil and a number of European and other countries worldwide have introduced various support schemes for bioethanol and biodiesel. The advantage of these biofuels is that they are relatively easily integrated with the current fossil fuel-based transport sector, at least up to a certain point. However, recent studies point to various negative effects of expanding the production of first generation (1G) biofuels further. 1G biofuels’ problems can be overcome by a transition to second generation (2G) biofuels. So far, 2G biofuels are much more costly to produce. We therefore ask: to what extent is targeted support to 2G biofuels likely to bring costs down? Additionally, are current support schemes for biofuels well designed in order to promote the development of 2G biofuels? We find that the prospects for cost reduction look better for 2G bioethanol than for 2G biodiesel. Bioethanol made from cellulose is far from a ripe technology, with several cost-reducing opportunities yet to be developed. Hence, targeted support to cellulosic ethanol might induce a switch from 1G to 2G biofuels. However, we find little evidence that production and use of 1G bioethanol will bridge the conversion to 2G bioethanol. Hence, to the extent that private investment in the development of 2G bioethanol is too low, current support schemes for 1G biofuels may block 2G bioethanol instead of promoting it.

International Climate Finance and Its Influence on Fairness and Policy

AbstractBesides costs and benefits, fairness aspects tend to influence negotiating parties’ willingness to join an international agreement on climate change mitigation. Fairness is largely considered to improve the prospects of success of international negotiations and hence measures raising fairness perception might – in turn – help to bring about effective cooperative international climate change mitigation. We consider the influences present international support of climate policy in developing countries exerts on fairness perception and how this again might affect international negotiations. In doing so we distinguish between fairness perception that is based on historical experiences and perception that is based on conjectures about opponents’ intentions. By identifying beneficial components of current support schemes lessons can be learnt for designing new schemes like the Green Climate Fund.

International Climate Finance and its Influence on Fairness and Policy

Besides costs and benefits, fairness aspects tend to influence negotiating parties’ willingness to join an international agreement on climate change mitigation. Fairness is largely considered to improve the prospects of success of international negotiations and hence measures raising fairness perception might – in turn – help to bring about effective cooperative international climate change mitigation. We consider the influences present international support of climate policy in developing countries exerts on fairness perception and how this again might affect international negotiations. In doing so we distinguish between fairness perception that is based on historical experiences and perception that is based on conjectures about opponents’ intentions. By identifying beneficial components of current support schemes lessons can be learnt for designing new schemes like the Green Climate Fund.

A European-wide harmonised tradable green certificate scheme for renewable electricity: is it really so beneficial?

Winds of change are blowing in the public promotion of renewable electricity (RES-E) in Europe. On the one hand, a move to allegedly more market-conform instruments for the promotion of RES-E has already taken place in some Member States. On the other hand, a Directive on the promotion of RES-E has recently been approved setting indicative targets for RES-E consumption and opening the possibility that a harmonised framework for support schemes will be implemented in Europe. This harmonised framework (in combination with trade in RES-E between Member States) can be compared to a situation in which Member States continue to apply their current support schemes. This paper analyses the pros and cons of harmonisation. The main conclusion is that if priority is given to the local/regional/national benefits of RES-E, then harmonisation in combination with a tradable green certificate scheme is not so advantageous for countries. Only if the policy priority is the achievement of the RES-E Directive targets at the minimum costs should harmonisation be favoured by national energy authorities.