Wind power , feed-in tariff , electricity transmission
Abstract:
We estimate the impact of a feed-in tariff for renewable power on wind power investment
in Germany at the county level from 1996-2010 controlling for windiness and access to the
electricity transmission grid. After the Renewable Energy Law (EEG) was passed in 2000, the
feed-in tariff became linked to wind power potential, such that more windy locations received
a lower incentive per unit of output. We find that a 1 e-cent/kWh increase in the feed-in tariff
rate would increase additions to capacity at the national level by 764MWper year from 1996-
2010 or 1,528 MW per year from 2005-2010. We analyze counterfactual scenarios, in which a
uniform incentive is offered instead of the wind-dependent EEG incentive. Significantly more
wind power plants are installed along the northern coastal counties in the uniform incentive
scenario. We find that while the uniform incentive results in greater total wind power output
per installed capacity, the EEG is ultimately more efficient by achieving 1% greater wind
power output per euro and 3.7% greater reductions in power sector emissions per euro. In
addition, we find a significant response from investors to an EEG provision that shifted the
cost of transmission system upgrades from wind power developers to grid operators in 2000.
The lack of a signal on scarcity of transmission capacity has likely resulted in a distribution
of wind power plants that makes suboptimal use of existing infrastructure, necessitating
investment in new transmission corridors.
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