Consequences for Wind Technology Diffusion under Different Configurations of Tradable Green Certificate Systems

The liberalisation of Western European electricity sectors challenged governments to revise the support systems for the reduction of market barriers of renewable technologies. One of the most frequently discussed support approaches is the imposition of legal quota obligations for the generation, trade or consumption of renewable electricity that can be implemented through tradable green certificates. But there are substantial uncertainties regarding the impacts this new support approach could have on the diffusion of renewable technologies. The aim of this paper is to suggest an analytical framework that could help underpin possible consequences for market diffusion of wind technology under different configurations of green certificates trade and obligation. The underlying idea is that any support system can be described in terms of aggregated economic risks and likely ranges of projects' profitability. These two characteristics strongly influence the diffusion patterns of the supported technology(-ies), which in turn are reflected in effectiveness of support systems and the prospects for continuity of market diffusion processes in the long-term. The main conclusion of the paper is that tradable green certificate systems can have very wide impacts on technology diffusion, depending on how the obligation is designed. Some systems encourage substantial new investments while others can threaten the continuity of market diffusion processes.