Renewable electricity support in perfect markets: Economic incentives under diverse subsidy instruments

We aim to provide an overview of renewable subsidy schemes, thereby focusing on investment incentives and cost effects in a uniformly-priced market zone. Specifically, we develop deterministic short-term equilibrium model that allows investigate both siting technological distortions onshore wind turbine deployment. This paper includes five support instruments: the feed-in tariff, sliding premium, fixed investment-based subsidies capacity-based subsidies. Investment decisions under these instruments are analyzed using extensive German case study. Apart from providing general overview, our contribution is threefold. First, show investment- generally not equivalent, despite being used interchangeably literature. Generators granted offsets opt for most system-friendly technologies, whilst those tend select least ones. As two generation-independent promote very different question prevailing belief learning-by-doing externalities must be related capacity. Second, premiums yield similar outcomes as effects, can substitute mitigate risks. conclusion holds technology-specific within zone, but might hold over multiple pricing zones or technology-neutral support. Finally, arise distortions, locational roughly same all instruments.