Renewables portfolio standard: a means for trade with electricity from renewable energy sources?

This paper discusses the main support mechanisms for enhancing the deployment of renewable energies (RE) implemented in different industrialised countries. The focus is on the electricity sector, where deregulation and liberalisation has led to market opening and introduction of competition in the formerly strongly regulated power market. Under open market conditions, price regulation mechanisms in favour of renewable energies, which were used by many governments to support renewables tend to be considered as being inappropriate, because they lead to distortions in competition and are difficult to abolish once market participants got used to them. Therefore, the idea of creating a demand for RE instead of supporting supply is gradually spreading. This paper concentrates on the Renewables Portfolio Standard (RPS), which is a considerably new instrument that is aimed on the demand side and has only recently entered discussion. It is based on legislatively mandating a percentage share of electricity generated from renewables and proved with certificates. Before this new means is discussed in more detail, a short overview of the existing supply side mechanism is given, to point out the different approach. In addition, examples of some countries already having some experience with the RPS are given, to show the present status of implementation. Derived from these theoretical considerations and practical experiences, the paper discusses possible impacts on market participants. They depend strongly on the outline of the RPS and the organisation of the electricity sector adopted. As a conclusion, the introduction of an RPS cannot alone solve the problem of enhancing the use of RE. However, the advantages are a higher degree of competition among generators or developers of RE technology, more freedom of choice concerning the options for meeting the requirement and perhaps less government expenditures. Also, experiences with national certificate trading within the RPS system could ease the way for international, or at least European, trading systems like the emissions trading as proposed in the Kyoto protocol. (C) 2001 Elsevier Science Ltd. All rights reserved.