Energy  |  Publications  |  13.07.2011

The Debate over Fixed Price Incentives for Renewable Electricity in Europe and the United States: Fallout and Future Directions

A publication from the Heinrich-Böll-Stiftung which looks at the two main policy tools for stimulating renewable electricity generation in Europe and the USA; feed-in tariffs and Renewables Portfolio Standard.

Feed-in tariffs offer a long-term, fixed price payment to renewable energy generators, whereas RPS policies require utilities (in integrated monopoly service territories) or generation service providers (in states with retail competition) to supply a minimum percentage of their electricity from renewable sources.

The European Union has substantial experience with both approaches. Feed-in tariffs have thus far driven rapid renewable energy capacity expansion in several European Union member nations while RPS polices have not. The perceived success of feed-in tariffs has inspired the adoption of similar laws by other countries, and feed-ins are currently world’s most widespread national renewable energy policy.

Experience with feed-in tariffs in the United States is limited, and US states have instead focused primarily on RPS policies. RPS policies have diffused rapidly around the United States, but the momentum and impact of European feed-in tariffs is beginning to attract the interest of US policy makers.

In Europe there has been a lively debate between RPS and feed-in tariffs in anticipation of a harmonised EU-wide policy. In the US, debate between RPS and feed-in tariffs has been limited because feed-in tariffs have not generally been viewed as a feasible policy option. The goal of this paper is to examine whether feed-in tariffs (on their own or in hybrid) can be adapted to work in concert with existing and proposed US state-level policies and electricity market structures. The paper reviews policy development in the US and Europe and discusses the implications of the European policy debate for US audiences.

Edited extract from the introduction.

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creative commons Mike Ray