Incentive-based Financial Support Scheme for Immature Renewable Energy Systems

Most of today’s renewable energy systems rely heavily on investments as well as public financial support. This support is often given by means of a higher sales price for each kWh produced, i.e. feed-in tariffs (FITs), green certificates or Renewable Obligation Certificates (ROCs), or by a fixed amount, being a percentage of the construction costs of the facility. All these ways of financing have different downsides. The feed-in tariff based kWh prices have some incentives to improve the technology, but enables infeasible solutions to stay financially supported even while R&D is in status quo. The fixed amount only helps with installation costs, which should not be an issue once the technology is sufficiently feasible. This means that the current ways of granting financial support all lack incentives for increasing production or decreasing construction costs. This paper presents a unique scheme for determining the level of support, based on production target curves. This incentive-based approach pushes development to constantly improve, and enables both investors and the general public to have a transparent view of which technologies are performing and improving the most, i.e. aiming for the steepest target curve.