Regulating rents from renewable energy support policies: RPS vs. FIT

SSEE Visiting Fellow, Tae-hyeong Kwon (Associate Professor, Hankuk University of Foreign Studies, Seoul, Korea), gave a talk on his work in April 2012.

Seminar Summary: Two popular market support policies of renewable energy sources for electricity (RES-E) are: RPS (Renewable Portfolio Standard) and FIT (Feed-In-Tariffs). These policies intervene in RES-E markets by regulating price (FIT) or quantity (RPS) of RES-E. Supports of RES-E are necessary to correct negative externality of fossil fuel-based electricity generation, as well as for positive externality of technology innovation effects of RES-E. However, market regulation may result in rents or windfall profits being given to non-marginal RES-E producers. RES-E producers also tend to seek rents by lobbying for a regulation advantageous to RES-E producers. Since large rents given to non-marginal RES-E producers can be a main reason for high costs of RES-E support policy, as well as for dynamic inefficiency of RES-E supports, it is important to truncate rents from RPS and FIT for successful RES-E support policies. This seminar examines rents or windfall profits given to non-marginal producers from RPS and FIT. In addition, it investigates policy design elements to curb rents from FIT and RPS with cases of USA, UK, Germany and Spain et al.

Speaker Biography: Tae-hyeong Kwon is currently Associate Professor of Public Administration at Hankuk University of Foreign Studies, South Korea. He received a DPhil degree from the University of Oxford, majoring environmental policy. He also holds BA and MA in Economics from Seoul National University. Previously he worked for the Korea Research Institute for Human Settlement and the Korea Transport Institute. He published several papers on the subject of sustainable development in leading scholarly journals including Ecological Economics, Energy Policy, Transport Policy and Transport Reviews. His research interest includes market governance of sustainable technologies such as renewable energies and institutional analysis of environmental policies.