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• NRETs provide a number of societal benefits. NRETs deliver social and environmental benefits that are usually unrecognized and un-priced in the market. Policies and regulations need to be designed so that these benefits are internalized in investment decisions. In order to accommodate these differences, mechanisms can be implemented to compensate for the current biases, and/or the market rules can be changed altogether so that they provide a truly evened playing field. Entry mechanisms Renewable energy policy is rapidly evolving. New policies have been introduced every year and many existing policies have been continuously revised. There have been numerous studies devoted to describing and analyzing these different policy types and enumerating best practices, including several recent studies focusing specifically on policy models in LAC.82 Recent studies have identified over 100 different categories of policy support mechanisms83. National renewable energy targets have usually been a key building block for market entry of non- traditional renewables. In 2005, 45 countries had national renewable energy targets in place.84 By 2012, the number had increased to close to 120.85 Although many of these targets are not accompanied by mechanisms to penalize stakeholders for non-compliance, they are nevertheless very useful in providing a political direction and driving policy change. The primary drivers for accelerating large-scale, on-grid renewable energy market growth and for meeting renewable energy targets at the international level, have been feed-in tariffs (FITs) and renewable portfolio standards (RPS) supported by tradable credits. Both policies compel utilities to procure renewable electricity by fixing either the price or the amount of energy, respectively. Auctions represent a third model in which a specific capacity or energy is competitively procured. FIT rates are set administratively, auctions set rates through periodic competition, and short-term credit markets set rates based on spot market trading. In some cases policymakers combine these procurement policies in new and innovative hybrids. Some RPS policies utilize a combination of fixed prices, auctions, and short- term credit trading – or use the mechanisms in parallel.86 Of these three, the use of short-term credit trading alone has receded in favor of alternative (or hybrid) models because projects supported by variable revenues from credit trading are difficult and expensive to finance.87 Significant time and effort has been devoted to describing FITs88 and auction designs89 as well as discussing the comparative merits of each.90 The practical differences between these two policy types, however, are fairly limited. Beyond the rate setting mechanism, both polices can be designed to be similar in terms of long-term and standard contracts, capacity caps, technology eligibility, priority and guaranteed interconnection, priority dispatch, etc. Incentive levels that are too high create excess profits for generators, whereas incentives that are too low may not support market growth and may not achieve policy objectives. In practice, both policy types can be (and have been) designed to be efficient and effective and to meet a broad range of different policy objectives. Rethinking our energy future p. 18PDF Image | White Paper on Renewable Energy for the 3GFLAC
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