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Feed-in Tariffs--The Economic Case

October 7, 2008
Paul Gipe

Ernst & Young Find Feed-in Tariffs Cheaper Than Trading System


 

The international accounting firm, Ernst & Young, has concluded that Germany's system of feed-in tariffs delivers more renewable energy at lower cost to consumers than Britain's Renewable Obligation and its certificate trading system.

The conclusion turns on its head the common misperception that feed-in tariffs cost consumers more than so-called "market-friendly" polices, such as tendering and certificate trading systems.

Ernst & Young clearly show their allegiance to the British trading system when commenting on their surprise at the findings, "Although a feed-in tariff may be culturally incompatible in the UK, there is an argument that the ROC [Renewable Obligation Certificate] system needs a review if it is to deliver the required capacity in a cost effective manner, . . .

The findings were contained Ernst & Young's Renewable energy country attractiveness indices for the first quarter of 2008, page 13. They concluded that Germany generated more renewable energy at lower costs than Britain.

Despite the significantly better wind resource in Britain, Germany produced four times more renewable energy than Britain at one-fifth the relative (per kWh) cost.

The Ernst & Young attractiveness report references a British study on Renewable Heat. The reference document itself is worthy of note. After describing the success of Germany's EEG in promoting the development of solar PV, the report presents a table comparing the two countries renewable electricity markets and then comments, " . . . the EEG has delivered greater output of renewable power for less money than the RO [Renewable Obligation] hence is arguably better value for money."


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