1. Application: RES-E Promotion 1. Policy Background 2. Efficiency Considerations 3. Numerical Framework (ELEC-MR) 4. Policy Analysis

2. 1. Policy Background

3. Two strategies to promote RES-E in Europe: -Feed-in tariff systems with differentiated (technology-specific) subsidies -Quota obligations with trade (TGCs:= tradable green certificates) Alternative RES-E Promotion Schemes Feed-in tariffs Key question:Price tag for additional objectives than greening of electricity (additional costs of differentiated feed-in)? Green quotas +Flexibility (easily adjustable) +Low risk for investors + Serves additional targets (industrial / regional policy goals) -Demands „well informed“ regulation -Danger of over-funding (rent seeking) -Potentially high excess costs + Little information requirements +Efficient de-centralized mechanism - Risk and uncertainties about future market developments -„Hurdles“ for infant technologies

4. 2. Efficiency Considerations

5. Uniform feed-in tariff (eq. regional quota) Diversified feed-in tariff Additional Cost of Diversified Feed-In

6. 3. Numerical Framework

7. ELEC-MR: Basic Model Structure Supply Company 1 Company 2. Company n Region 2 Region r Residential demand - Base-load - Peak-load Industrial demand - Base-load - Peak-Load Residential demand - Base-load - Peak-load Industrial demand - Base-load - Peak-Load Supply Company 1 Company 2. Company n Region 1 T Static (short-term) representation of EU electricity markets Cournot competition among EU power companies

8. ELEC-MR: Parametrization 23 countries (EU-25 without Malta and Cyprus) 1160 power plants –11 representative technologies –Detailed bottom-up Information on costs 210 companies Supply: 23 countries (EU-25 without Malta and Cyprus) Residential and industrial electricity demand –Load-specific demand pattern (base, peak) –Elastic demand (demand elasticities for 4 segments: industrial- base, industrial-peak, residential-base, residential-peak) Demand:

9. 4. Policy Analysis

10. Illustrative Policy Scenarios

11. Results (1): EU Technology Mix

12. Results (2): RES-E Mix

13. Results (3): Economic Indicators