Take-or-Pay Contracts for Renewables Deployment

Energy Policy, Vol. 36, p. 2481, 2008

Posted: 26 Jan 2010

See all articles by Angus Johnston

Angus Johnston

University of Oxford - Faculty of Law

Amalia Kavali

University of Cambridge

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin)

Abstract

Renewables require support policies to deliver the European 20% target.

We discuss the requirements for least cost development and efficient operation and quantify how different schemes: (i) allow for the development of a renewable energy technology portfolio; (ii) reduce rent transfers to infra-marginal technologies or better than marginal resource bases; and (iii) minimise regulatory risk and thus capital costs for new projects.

Long-term take or pay contracts minimise regulatory uncertainty, create appropriate incentives for location and operation, allow for efficient system operation and seem compatible with European State aid law. We discuss how property rights legislation protects existing renewables investors, and thus can ensure ongoing investment during a transition towards the new scheme.

Keywords: Renewable Support Policy, Property rights, Transition, Regulatory Risk, Law

JEL Classification: L50, L94, O31, P14

Suggested Citation

Johnston, Angus C. and Kavali, Amalia and Neuhoff, Karsten, Take-or-Pay Contracts for Renewables Deployment. Energy Policy, Vol. 36, p. 2481, 2008, Available at SSRN: https://ssrn.com/abstract=1542662

Angus C. Johnston (Contact Author)

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom
+44 (0)1865 276650 (Phone)

HOME PAGE: http://www.law.ox.ac.uk/profile/angus.johnston

Amalia Kavali

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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