Harmonization of renewable electricity feed-in laws: A comment

This comment aims at critically analyzing some of the economic efficiency issues that are raised in the paper by Muñoz et al. [2007. Harmonization of renewable electricity feed-in laws in the European Union. Energy Policy 35, 3104–3114] on the harmonization of feed-in law schemes for renewable electricity in the European Union. We comment on the choice between green certificate systems and feed-in laws, but pay particular attention to the implementation and design of a harmonized feed-in law scheme. In the comment we argue first that the approach suggested by Muñoz et al. tends to downplay many of the practical difficulties in assessing the real costs facing investors in renewable electricity, not the least since the presence of regulatory uncertainty about the marginal costs of renewable electricity may be essential for the choice between different support systems. Concerning the benefit side of renewable electricity promotion, the Muñoz et al. (2007) paper builds on an interpretation of the EU Renewables Directive that provides plenty of room for national priorities and that therefore essentially implies that harmonized support premiums per se are of little value. We argue instead that a harmonized system should primarily address the international spillover effects from renewable electricity promotion, not the least those related to improved security of supply in Europe. There exists then a strong case for disregarding the specific national benefits of renewable electricity production in the design of harmonized support systems, and for instead considering international—perhaps at the start bilateral—policy support coordination based on entirely uniform support levels.