The schemes to remunerate investments in renewables should be oriented to maximize the net benefits of the long-term transition of the energy system.

 

Public debates on renewable remuneration schemes are often heavily influenced by the perception of their immediate costs. Once targets have been set, trying to reach them at the lowest possible immediate cost certainly is one reasonable guiding principle. However, it should not be the only principle.

Beyond the immediate costs of the remuneration scheme, one should consider its impact on the power system costs as a whole, in the short and in the long term. In order to maximise the net benefit of RES to the power system, including a limitation of the need for energy storage and expansion of transmission and distribution systems, remuneration schemes for RES should give adequate price signals to RES generators, which support the overall coordination of generation and consumption.

Furthermore, it is important to consider not only the costs of the remuneration scheme, but also its benefits: not just abstractly in terms of reaching targets, but also in terms of reduced external effects, reduction of risks borne by society, reduction in fossil fuel imports, creation of local development and jobs, etc. Moreover, the transition towards high shares of renewables obviously implies a relatively long period of long-term investments, and therefore any cost-benefit analysis should consider not only the immediate costs and benefits, but also the long-term effects: certain investments may increase the burden within a certain decade, but be effective in terms of reducing the overall costs of the transition period. From this perspective, a cost-minimisation approach focused exclusively on intermediate targets (e.g. 2020 or 2030) fails to consider an important dimension and is likely to lead to suboptimal decisions.

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