Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300815 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
DIW Discussion Papers No. 2092
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Public support systems and private investments in renewable energy are increasingly existing side-by-side and are both emphasized in policy proposals on the European and national levels. This paper assesses the interaction between the two approaches with respect to cream-skimming, i.e., the potential for low-cost projects to sign private contracts that increase the costs of publicly supported renewable energy. This paper uses a stylized microeconomic model and a numerical simulation to assess this question. It finds that the incentive to cream-skimming exists when governments employ any form of resource differentiation in their renewable energy contracts. The numerical analysis shows that, at current price levels, cream-skimming could increase power prices by 2-6% depending on the PPA's mark-up. The effect is larger for a wider cost-distribution of renewable energy projects, which might occur as the energy transition proceeds.
Subjects: 
climate policy
renewable energy
distributional consequences
creamskimming
contracts for differences
JEL: 
D44
Q42
Q48
Document Type: 
Working Paper

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