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Policy and investment in German renewable energy

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Published: April, 2016

The relationship between finance and policy stands at the centre of Germany’s twin objectives of reaching renewable energy deployment targets and doing so cost effectively. With the renewable energy industry maturing, and calls growing for improving the cost competitiveness of renewable energy policy, German policymakers and investors must continue to improve their understanding of how policy can influence the potential investment pool, and how policy can drive a robust and low-cost mix of investors and investment to underpin the continued development of a cost-effective low-carbon energy system. Climate Policy Initiative examined the availability of capital for renewable energy, the cost-effectiveness of different mixes of capital and investors used in meeting Germany’s medium and long-term deployment goals, and the potential impact of policies on this mix of investment.

Our analysis indicates that, provided an appropriate policy framework is in place, there is more than sufficient capital available to meet German renewable energy targets, but that a mix of investors is needed to meet Germany’s objectives at lowest cost. To meet deployment goals most cost-effectively in the medium term, Germany must meet the challenge of creating electricity system flexibility to facilitate integration of renewable energy without imposing unmanageable risks on renewable energy investors.

More generally, for investors we find that the most relevant near-to-medium-term policy decisions regard incentive auction design, end user participation, support design and long-term targets. However, for the medium-to-long-term development of investment, issues including curtailment policy and energy market design will become increasingly important and merit immediate attention.

Policy and investment in German renewable energy
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Keywords
  • cost containment
  • electricity
  • energy finance
  • energy infrastructure
  • energy transition
  • feed-in tariff
  • grid
  • institutional investors
  • low-carbon electricity system
  • renewable energy
  • solar
  • utilities
  • wind