Surplus Power Tariffs. Boosting renewable investment through fair remuneration

This paper explains why standardised tariffs for renewable energy generation should continue to play a central role in energy policy. The overall goal is to massively accelerate the uptake of renewables to comply with the Paris Agreement. The demand for new renewable capacity is still not sufficiently incited by the energy markets due to incumbent fossil and nuclear generation and slow electrification of the heat and transport sector. Therefore, policy intervention is still necessary. 

A New Policy Mix should be envisaged which promotes renewable installations of all system sizes. To that end it is argued that a so-called Surplus Power Tariffs (SPTs) should be introduced for small and medium sized systems. These tariffs would provide a fair remuneration for energy that is not self-consumed or shared. 

SPT levels would be set just high enough to make minimum viable business case. To achieve a good business case, (joint) self-consumption and energy sharing or further efforts like the provision of systems services will be required. 

To solve other problems that come with large-scale deployment of renewables, the refinancing mechanisms of the energy system needs to be revisited (levies, taxes, charges, etc.) and a new Energy Market Design is required. The paper builds on the recent study (Jacobs et al. 2020) and aims to provide additional considerations for the design of the New Policy Mix and the underlying tariff schemes.