An Empirical Analysis of the Fiscal Incidence of Renewable EnergySupport in the European Union

Portrait shot of Dr Haar
Dr Lawrence Haair is a Financial Risk Professional

In liberalised energy markets, electricity from Renewable Energy (RE) using Solar PV and Wind Turbines requires financial support because the expected number of generation hours is insufficient to induce private investment.   Such support has a direct cost from the additional expenditure over what would have been incurred had fossil fuel generation been used and indirect costs arising from the random and distributed nature of the RE output.  Comparing European Union countries between 2007 and 2017, we find the pricing structure of retail electricity is regressive and correlated to reliance uponRE.  Although initially, the direct and indirect costs of RE affects integrated utilities and aggregators, the ultimate burden largely falls upon lower income cohorts.  Given policy objectives for RE, these finding are worrisome.   Though as a society we may benefit from reducing dependence uponfossil fuels, the burden of this transition falls upon those with the lowest income, raising questions over fairness.   Explaining the reasons for fiscal regressiveness leads to normative suggestions on how it may be redressed.


Dr Lawrence Haair is a Financial Risk Professional with international experience at Director and MD level, managing market and credit risk for commodities and FX at major financial institutions, such as Credit Suisse and UniCredit.  He has been a Director in Audit Assurance for Deloitte and the Head of Valuation for RWE – UK.  He is a subject matter expert in the valuation and modelling of complex assets/liabilities (IFRS 9).  He has workedfor the UK Financial Authorities, as a Senior Risk Specialist covering commodities.

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