Solar Energy Perspectives - IEA

Chapter 10: Policies
Figure 10.6 Schematic illustration of the difficulty in controlling overall costs
in setting FIT levels
Electricity costs
FIT
Uncertainty range
Rapid cost changes
? ? ?
New capacities
Notes: The red line represents the FIT level. The blue line represents the uncertain, “flat” and fast-moving (as symbolised by the
arrow) PV supply curve. The FIT may deliver much more or much less than expected, as the three vertical red lines suggest.
Key point
Frequently adjusted FIT levels control marginal costs, but not necessarily total costs.
Greater international co-ordination may also help smooth out variations. PV bubbles and
bursts have been created when investors left some countries for others because of different
policy decisions, tariff level differentials, and other framework conditions. In Europe, this
made the task of German policy makers difficult as the German market seemed to be the
market of last resort. When very profitable options are no longer available in other countries,
the PV industry prefers the low returns of the German market to keeping modules in their
stocks. If other governments take strong limitative decisions (whether through price or
quantity controls), Germany will again run the risk of rather uncontrolled PV market growth.
Enhancing collaboration among countries to expand markets and reduce price differentials –
taking into account the different solar resources and market maturity levels – appears to be
an important policy priority from this perspective as well.
Beyond increased coordination at a regional level, the implementation of support policies in
a larger number of countries, or an increase in the ambition level of existing objectives and
policies in various countries, could also help smooth out the deployment of solar electricity
and alleviate the concerns over overall policy costs that uncapped FITs in too few countries
have been raising.
Renewable energy portfolio standards and solar
renewable energy certificates
Under RPS, utilities are encouraged to secure generation from renewables by offering
renewable generating capacity long-term, stable PPAs. Solar RECs (SRECs) allow distinguishing
the electricity itself from its green nature or guaranteed origin (the sun). Both can be subject
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© OECD/IEA, 2011