The dynamic efficiency of feed‐in tariffs: The impact of different design elements

Dynamic efficiency has received much less attention than the effectiveness and static efficiency criteria to assess policies to support electricity from renewable energy sources (RES‐E). On the other hand, the literature on RES‐E support shows that the choice of design elements within RES‐E support instruments is at least as important to successfully promote RES‐E as the choice of specific instruments. The aim of this paper is to build a theoretical framework for dynamic efficiency analysis and assess the dynamic efficiency properties of the different design elements of feed‐in tariffs. It is shown that, in fact, several design elements can have a significant impact on the different dimensions of dynamic efficiency. Particularly relevant design elements in this context are technology‐specific fixed‐tariffs, floor prices, degression, reductions of support over time for existing plants, long duration of support and support falling on consumers. In addition, it is shown than some design elements would be more appropriate than others to activate specific dimensions.