Public policy influence on renewable energy investments—A panel data study across OECD countries

Abstract

This paper examines the impact of public policy measures on renewable energy (RE) investments in electricity-generating capacity made by institutional investors. Using a novel combination of datasets and a longitudinal research design, we investigate the influence of different policy measures in a sample of OECD countries to suggest an effective policy mix which could tackle failures in the market for clean energy. The results call for technology-specific policies which take into account actual market conditions and technology maturity. To improve the conditions for institutional investments, advisable policy instruments include economic and fiscal incentives such as feed-in tariffs (FIT), especially for less mature technologies. Additionally, market-based instruments such as greenhouse gas (GHG) emission trading systems for mature technologies should be included. These policy measures directly impact the risk and return structure of RE projects. Supplementing these with regulatory measures such as codes and standards (e.g. RPS) and long-term strategic planning could further strengthen the context for RE investments.