Scandinavian Working Papers in Economics
CERE Working Papers,
CERE - the Center for Environmental and Resource Economics
No 2011:14: The Profitability of Power Generating Firms and Policies Promoting Renewable Energy
Andrius Kažukauskas () and Jurate Jaraite ()
Additional contact information
Andrius Kažukauskas: CERE, Postal: Dept. of Economics, University of Umeå, S-901 87 Umeå, Sweden
Jurate Jaraite: CERE, Postal: Dept. of Economics, University of Umeå, S-901 87 Umeå, Sweden
Abstract: With policies to promote power generation from renewable energy sources (RES) becoming important part of climate and energy policy worldwide, there is now considerable interest in understanding how these different market-based mechanisms affect power generating firms in practice. The existing theory provides conflicting guidance regarding profitability of Tradable Green Certificates (TGC) over Feed-in-Tariff (FIT) based policies. Thus, the main goal of this study is to empirically assess the performance of power generating firms operating in the TGC scheme environment relative to the performance of power generating firms operating under alternatives RES support mechanisms. The main finding of this study is that, in Europe, TGC schemes are associated with higher returns for power generating firms. This supports the hypothesis that higher investment uncertainty induced by the TGC policy nature coupled with some market imperfections lead to higher profits for electricity producers operating in TGC schemes.
Keywords: electricity; European Union; emission trading; feed-in-tariff; renewable energy; tradable green certificates
18 pages, November 24, 2011
Full text files
CERE_WP2011-14.pdf
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