JICA Research Fellow Presents Paper on Policies for Promoting Renewable Energy at the 5th World Congress of Environmental and Resource Economists

The 5th World Congress of Environmental and Resource Economists (WCERE) was held in Istanbul, Turkey between June 29 and July 2. It is the world forum for environment and resource economics. The Congress assembled more than 1,000 participants from around the world and provided opportunities to share the latest research knowledge and to build up networks. The event featured panel discussions on policy issues in addition to the presentation of academic papers.

JICA-RI Research Fellow Daiju Narita presented a paper in the parallel session entitled “Electricity Markets”. Narita presented the paper on the theme of “Who Gains from Removing Price Volatility Risk from RES-E Operators?,” which he co-authored with Professor Till Requate of the University of Kiel, Germany.

Many countries have adopted subsidy policies for promoting the use of renewable energy in order to reduce carbon dioxide emissions. Those schemes can be either price-based such as feed-in tariff schemes, or quantity-based including the RPS (Renewables Portfolio Standard), which obliges electricity companies to produce a specified fraction of their electricity from renewable energy. To date, there has been a common understanding that price-based policies are more effective than quantity-based ones in promoting market entries of renewable power producers because price-based policies reduce the investment risk for operators.

The paper compares the effects of feed-in tariff schemes relative to quantity-based schemes under an environment where conventional power production out of fossil fuels and nuclear power or power generation from renewable energy are subject to risks in the cost of production. The result showed that when risks exist in the production cost, the price-based approach is not necessarily more effective in encouraging new operators to enter the market, which presents a nuanced view in terms of policy choices in the face of risks of electricity production.

Narita will finalize the research paper with Professor Requate, reflecting the discussion of the Congress. The result of this study is to be utilized for JICA-RI’s coming research on risk management of climate change.

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