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| 1 |
ID:
112909
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| Publication |
2012.
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| Summary/Abstract |
Tradable green certificate (TGC) or renewables obligation (RO) programs typically include a buy-out option, but only in the UK the buy-out fund is redistributed back to the suppliers who have submitted the certificates. We show that when the buy-out fund is redistributed, the supply of renewable energy responds positively to the market conditions and renewables target. Without it, the buy-out rate is equivalent to a maximum price. However, redistribution of the buy-out fund may induce strategic behavior from producers who have market power. We analyze the impacts of market power and integration on the supply of conventional and renewable energy under the RO program with the buy-out fund recycled, and devise some empirical tests to predict these impacts. Policy implications of this study are discussed with special reference to the new FiT CfD system.
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| 2 |
ID:
105810
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2011.
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| Summary/Abstract |
The UK has enviable renewable resources, both onshore (wind) and offshore (wind, wave and tidal) (The Offshore Valuation Group, 2010). The government has had policy mechanisms in place since 1990 to encourage these resources to be developed. The current mechanism, the Renewables Obligation (RO), was specifically designed to emphasise competition and therefore to fit in with the UK's overall strategic approach to energy policy. However, as yet, it has not delivered the capacity that it was designed to do, and as a result the UK faces a difficult challenge in attempting to meet European-wide renewable energy targets for 2020, as well as longer term decarbonisation targets. This paper explores some of the major reasons why the RO has performed so poorly to date and considers the prospects for improvement up to 2020. It concludes that the strategic emphasis on competition in the support mechanisms has played a key role in limiting renewables development, but that the mechanism has changed significantly since it was introduced. However, these changes, together with proposals for electricity market reform, still do not address important elements of risk in comparison with a standard Feed In Tariff.
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