The schemes to remunerate investments in renewables should allow for prompt adjustments (of the support levels) for new investments, responding to changing conditions, while guaranteeing that the framework for investments and the RES deployment strategy are stable enough to attract investment capital and to achieve the long term targets.

 

Past experience has shown the importance of the ability to promptly adjust renewable support schemes in response to changing conditions. When investment costs go down more rapidly than expected, an inability to readjust the level of support leads to excessive investors rents, excessive costs for the consumers and an overheating of the market, sometimes jeopardising the political support for the scheme as a whole. In other words, remuneration schemes should be able to dynamically adapt to the reductions in the costs of technologies. Similarly, in the opposite case of rising costs of RES generation, prompt adjustments may be necessary. Adjustments should only be applied to new investments, and not on a retroactive basis.

Given the number of potential unexpected factors in the energy transition, a degree of flexibility will be necessary also in the future.

On the other hand, if a remuneration scheme can be modified too easily, it becomes unreliable and would be counter-productive. A sound policy framework not only needs to encourage immediate investment in generation projects (renewable power systems), but also longer-term investment in the supply chain (e.g. R&D, factories), technical infrastructure (transmission and distribution grids, other flexibility sources, harbours for offshore-wind, test centres etc.) as well as in social infrastructure (training, distribution and retail chains, awareness raising etc.). From a long-term investment perspective, stop-and-go policy is highly detrimental. The confidence of citizens and investors in (future) policies is an essential public good. Therefore, it is necessary to avoid abrupt or retroactive changes that destroys confidence and disrupts markets.

For these reasons, a flexible fine-tuning must be combined with a long-term deployment strategy stable enough to achieve long-term deployment targets.

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