The main support mechanisms to finance renewable energy development

• Published in: Renewable & sustainable energy reviews Vol. 40; pp. 876 - 885
• Main Authors: Abolhosseini, Shahrouz, Heshmati, Almas
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.12.2014; Elsevier
• Subjects: Applied sciences; Carbon; Carbon emission tax; Economic data; Emissions control; Energy; Energy consumption; Energy economics; Energy policy; Exact sciences and technology; Feed-in-tariffs; Finance; Financing renewable energy; General, economic and professional studies; Natural energy; Policies; Renewable energy; Renewable energy sources; Tax incentives; Tradable green certificates; Tradable green certificates; Feed-in-tariffs; Renewable energy; Tax incentives; Carbon emission tax; Financing renewable energy; Incentive; Fiscal policy; Gas emission; Carbon dioxide; Tariff; Energy policy; Tax; Electricity; Financing; Certificate
• ISSN: 1364-0321; 1879-0690; 1879-0690
• DOI: 10.1016/j.rser.2014.08.013

Considering that the major part of greenhouse gases is carbon dioxide, there is a global concern aimed at reducing carbon emissions. In addition, major consumer countries are looking for alternative sources of energy to avoid the impact of higher fossil fuel prices and political instability in the major energy supplying countries. In this regard, different policies could be applied to reduce carbon emissions, such as enhancing renewable energy deployment and encouraging technological innovation and the creation of green jobs. This study compares three main support mechanisms employed by governments to finance renewable energy development programs: feed-in-tariffs, tax incentives, and tradable green certificates. Considering that many of the promising technologies to deploy renewable energy require investment in small-scale energy production systems, these mechanisms could be used to enhance renewable energy development at the desired scale. Employing a carbon emission tax or emission trading mechanism could be considered ideal policies to mitigate emissions at the lowest cost. The comparison of feed-in-tariffs and renewable portfolio standard policies showed that the former is good when a policy to develop renewable energy sources with a low level of risk for investors is considered. However, the latter is an appropriate policy when a market view policy is applied by the government. Finally, considering technological progress and the cost reduction for power generation by renewable energy sources, we suggest that support mechanism policies should be reconsidered from the financial point of view.