The policy effectiveness of economic instruments for the photovoltaic and wind power development in the European Union

This paper measures the policy effectiveness of power purchasing agreements, capital grants, tax incentives, preferential loans, and research, development, and demonstrations for photovoltaic (PV) and wind power development in the member countries of the European Union (EU). The empirical findings confirm that the feed-in tariff is more efficient than renewable portfolio standards (RPS) for PV and wind power development, although RPS does have an effect on wind power development. However, the other economic instruments are all inefficient for PV development but are efficient for wind power development, except for tax incentives. Moreover, the economic growth required, serious financial deficits, and dependence on imported energy that discourage PV development are unrelated to wind power development. The energy intensity of the economy will have a negative impact on both PV and wind power development.