The economic analysis of renewable energy policies: a general overview and a historical perspective

The aim of this chapter is to provide a critical, historical overview of the evolution of public policy support for renewable energy technologies, with an emphasis on the last two decades, deployment support and solar and wind technologies. It shows that the economic justification for supporting the development and diffusion of renewable energy technologies has different rationales and that the type of support being provided is contingent upon the situation of the technology in the technology life cycle. It also shows that support for renewable energy technologies has several components, beyond the simplistic identification of “policy” with “instruments”. As important as the instruments are the existence of targets for these technologies and the stability of support. When it comes to instruments, although the focus in the literature has been on deployment support instruments, RD&D support has played a crucial role in improving the quality and reducing the costs of the currently mature technologies. Finally, this chapter illustrates how the success of deployment support instruments strongly depends on the way they are designed, and that trade-offs between different criteria used to assess such success are likely to occur when choosing a given design element over others.