Environmental Engineering Reference
In-Depth Information
scheme should also be included in the de
nition of cost-effectiveness. We should
distinguish between system installation, system operation and system adjustment
[
69
]. Transaction costs may fall on the public administration or on companies. The
former are usually called
[
51
]. This should be a main com-
ponent of the cost-effectiveness criterion and, indeed, a RES-E policy which complies
with the equimarginality principle at relatively low policy costs may still be inef
“
administrative costs
”
cient
if its implementation or functioning become burdensome in administrative terms,
leading to high administrative and/or transaction costs. It is indeed quite surprising
that analyses which take into account these transaction costs are virtually non-existent.
On the other hand, analyses on the cost-effectiveness of support have quite often
disregarded the total policy costs of complying with a RES-E target. For example, one
of the most well-known assessments of these policies, carried out under the EU-funded
OPTRES and RE-SHAPING projects (see, respectively, [
42
,
50
]) compare the unitary
costs of support (i.e.,
/MWh) for different types of policies. However, governments in
countries with either an already signi
€
cant penetration of RES-E or a recently large
increase in RES-E deployment are concerned about the total costs of the policy, i.e.,
unitary support costs times the level of deployment. The solar PV booms in several
European countries is a case in point. For example, net support in Spain for solar PV
increased 13-fold between 2007 and 2009, from 194 to 2629 M
€
, although the unitary
€
€
costs of support only increased from 39
/MWh in 2009. This
has certainly put a burden on electricity consumers which has led to policy measures
aimed at reducing those total costs (see [
70
] for further details). If these total costs
become a priority for governments, instruments and design elements should be
adopted with in-built cost-containment mechanisms. For example, in this context,
bidding schemes with a total budget allocation are superior to FITs without capacity
caps or limitations on the electricity generated which is eligible for remuneration.
On the other hand, there has beenmuch focus on static ef
/MWh in 2007 to 42
ciency andmuch less so on
dynamic ef
ciency which, as mentioned above, refers to the capacity of instruments to
induce technological innovation and technology cost reductions.
15
If only the currently
best or cheapest technologies are promoted by supporting their diffusion, this will not
allow currently more expensive technologies to penetrate the market. If currently
expensive mitigation technologies have a large cost reduction potential with increased
diffusion (as shown by several studies for energy technologies, see for example [
66
],
then supporting them today would lead to welfare bene
ts in terms of intertemporal
mitigation ef
ciency (i.e., cost-effectiveness in the short, medium and long terms). In
contrast to cost-effectiveness, dynamic ef
ciency provides an intertemporal perspective
on costs [
51
]. There is, thus, a risk of lock-in in the current technologieswith detrimental
economic consequences in the long term.
Not withstanding, it is arguable whether the dynamic ef
ciency criterion is useful
for national policy-makers. Reductions in the costs of the technologies as a result of
deployment or public R&D support is certainly relevant to reach supranational
targets cost-effectivelly. But such support is provided mostly at a national level. Why
15
Midtum [
71
] and del R
í
o[
19
] are some exceptions.
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