Environ. Resour. Econ. http://doi.org/jgv (2012)

Credit: © ISTOCKPHOTO/THINKSTOCK

Energy producers face high costs to meet the European Union renewable energy target of reaching a 20% share of energy from renewable sources by 2020.

The most common system to support renewable energy producers is the fixed feed-in tariff (FIT) — producers get the difference between the market price and a tariff set by the government, when the price is lower. Maria Kopsakangas-Savolainen of the Finnish Environment Institute and Rauli Svento of the University of Oulu, Finland, investigated wind technology in Finland, Sweden, Norway and Denmark, and found that a fixed FIT of €83.5 per MWh of energy produced would meet the target but result in a loss of profits. Their simulations showed that a premium-based FIT — producers get the tariff in addition to the market price — of €38.4 Euros per MWh of energy produced would meet the target with no profit loss. The researchers also analysed the role of the European Union emissions trading scheme and concluded that the scheme alone would be insufficient to meet the target.