A Policymaker’s Guide to Feed-In-Tariff Policy Design
Feed-in tariffs (FITs) are the most widely used policy in the world for accelerating renewable energy (RE) deployment, accounting for a greater share of RE development than either tax incentives or renewable portfolio standard (RPS) policies (REN21 2009). FITs have generated significant RE deployment, helping bring the countries that have implemented them successfully to the forefront of the global RE industry. In the European Union (EU), FIT policies have led to the deployment of more than 15,000 MW of solar photovoltaic (PV) power and more than 55,000 MW of wind power between 2000 and the end of 20091 (EPIA 2010, GWEC 2010). In total, FITs are responsible for approximately 75% of global PV and 45% of global wind deployment (Deutsche Bank 2010). Countries such as Germany, in particular, have demonstrated that FITs can be used as a powerful policy tool to drive RE deployment and help meet combined energy security and emissions reductions objectives (Germany BMU 2007).
This policymaker’s guide provides a detailed analysis of FIT policy design and implementation and identifies a set of best practices that have been effective at quickly stimulating the deployment of large amounts of RE generation. Although the discussion is aimed primarily at decision makers who have decided that a FIT policy best suits their needs, exploration of FIT policies can also help inform a choice among alternative renewable energy policies. This paper builds on previous analyses of feed-in tariff policy design, most notably by Resch et al. 2006, Klein et al. 2008, Held et al. 2007, Ragwitz et al. 2007, Grace et al. 2008, Mendonça 2007, and Mendonça et al. 2009a. It also provides a more detailed evaluation of a number of policy design options than is currently found elsewhere in the literature. This report considers both the relative advantages and disadvantages of various design options for FITs.
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