The efficiency of Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation

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Title: The efficiency of Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation
Authors: Doherty, Ronan
O'Malley, Mark
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Date: Sep-2011
Abstract: Ireland's Renewable Energy Feed-In Tariff (REFIT) for wind generation has some unusual features making it different from other REFIT schemes around the world. By utilising an annual floor price element the scheme presents an option value to the contract holder, which to date has gone unnoticed or unvalued in the market. By employing an option pricing framework, this paper has quantified for the first time in the public domain the expected costs and value of the Irish REFIT support scheme for wind generation. While the cost of the REFIT scheme to the electricity consumer appears to be lower than the cost of schemes in other countries, significant inefficiencies exist as a result of the structure of the scheme. The Irish REFIT scheme is contrasted with a single Fixed Price support scheme and the analysis suggests that the Fixed Price scheme can provide a similar or greater incentive to the wind sector at half the cost to the end electricity consumer, and may also prove more compatible with consumers desire to reduce inter-year electricity portfolio cost volatility.
Funding Details: Science Foundation Ireland
Type of material: Journal Article
Publisher: Elsevier
Copyright (published version): 2011 Elsevier
Keywords: Renewable EnergyEnergy PolicyRenewable Support SchemeOption PricingFeed-In Tarrif
DOI: 10.1016/j.enpol.2011.06.024
Language: en
Status of Item: Peer reviewed
Appears in Collections:ERC Research Collection
Electrical and Electronic Engineering Research Collection

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