Renewable Energy - Projects

Review quota obligation systems

The main policy instruments currently used in the EU Member States to achieve the targets set for electricity produced from renewable energy sources are:

1. The quota obligation system,
2. The feed-in tariff system,
3. The tendering system.

The current study, commissioned by Dutch Ministry of Economic Affairs, aims to review the experience gained with the quota obligation system, and thus to provide background information to enable the Dutch Government to better determine its own position in national and European discussions on renewable electricity support schemes.

The report provides an overview of the regions where obligation systems have been implemented and contains a detailed evaluation of the performance of the obligation systems in the USA, the UK and in Sweden. The obligation systems in these countries have been evaluated based on the following criteria:

• Effectiveness: Defined in terms of achieving a large amount of RES-E capacity added or production generated, this indicator relates to the quantitative impact of the obligation system in promoting new renewable energy.
• Market efficiency: Obligation systems are often argued to result in cost competition and therefore a minimization of costs in supporting renewable energy. In principle, well defined obligation markets should lead to such competition and therefore an efficient allocation of resources in support of renewable energy. Do obligation/TREC markets function well in practice, minimizing the cost of supporting renewable energy?
• Certainty for RES-E industry: Growth of RES-E capacity ultimately depends on the decisions of individual investors. This criterion assesses whether or not the system is perceived as stable in the short and long term from the perspective of investors.
• Cost effectiveness: This measure is defined as the costs per kWh of RES-E, including the ‘dead weight’ costs such as transaction costs, overcompensation of certain market actors etc.
• Stakeholder support for the system: The success of the obligation system may depend, in part, on the level of support the system has from various stakeholders. Widespread stakeholder support may also indicate a well-functioning policy.
• Equity: From a government point of view and for long-term sustainability of the system, a fair distribution of costs and benefits of RES-E implementation over various stakeholders is important.

Here you can find the conclusions of the report

The report can be downloaded at ECN.

For more information please contact Nico van der Linden or Martine Uyterlinde