A step into the unknown: feed-in tariff for energy saving

Panel: Panel 1: The foundations of a future energy policy. Longer term strategies

Authors:
Paolo Bertoldi, European Commission, DG JRC, Italy
Silvia Rezessy, Central European University, Hungary

Abstract

Over the last decades there has been a heated debate about the comparative advantages of quantity versus price policy instruments in the field of sustainable energy (see definitions in the paper). In renewable electricity generation (RES-E) these mechanisms are represented by renewable quota systems coupled with tradable green certificates, and by feed-in tariffs (FITs), respectively. Recently the interest of energy efficiency policy makers has also been drawn by quantity policy instruments. In a few European countries white certificate schemes have been introduced, which combine energy savings obligations with tradable certificates for energy savings from verified projects. Following the promising results delivered by feed-in tariffs for the support of RES-E, it could be interesting to explore the feasibility and possible set up of a feed-in tariff for end-use energy savings.

The paper takes as a point of departure the comparative analysis of quantity systems versus price systems with regard to RES-E. It builds on the theoretical debate of “prices-versus-quantities” and reviews the results achieved by instruments from these two categories in RES-E. The paper reviews other more recent financial support schemes used for end-use efficiency and energy savings such as wire charges and demand response bidding. Taking into account the particularities of end-use energy efficiency projects, the paper subsequently discusses the feasibility and implications of introducing a feed-in type of support for end-use energy efficiency and energy savings. The paper finally discusses the viability for integration of a feed-in tariff for energy savings with a renewable one with the aim of achieving maximum cost effectiveness and improving the coherence of sustainable energy systems. The paper is intended to open a larger debate on a possible FIT for energy savings, and in particular on some theoretical and practical implementation issues, such as measurement.