A Literature Review on Subsidies to Electricity From Renewable Energy Sources

This study reviews a selection of literature on the cost-effectiveness of government support for the research, development, demonstration and the deployment of technologies that generate electricity from renewable energy sources, with an aim of answering three questions: i) what justificiation is typically given for these subsidies?; ii) how are renewables being subsidized today?; and iii) what have studies concluded about the cost-effectiveness of these subsidies? It finds that subsidies for electricity from renewable energy sources are typically justified by reference to four main policy objectives: environmental gains (in particular, reductions in GHG emissions); stimulating economic development (in particular, creating a national RET industry and related employment); improving energy security; and driving further cost-reductions in renewable energy technologies. It finds that, although there is a broad range of information available about subsidy mechanisms, that there is little consistent data available about subsidy expenditure or recipients. Finally, it also finds that most studies have attempted to analyse cost-effectiveness of subsidies with respect to deployment, as opposed to the ultimate objectives of the subsidies, as identified in this first stage of this review.