Market-based support schemes for renewable energy sources

The European Union set ambitious goals regarding the production of electricity from renewable energy sources and the majority of European governments have implemented policies stimulating investments in such technologies. Support schemes differ in many aspects, not only in their effectivity and efficiency but also in the long-term incentives provided and in the financial risk involved for investors. This research compares the performance of different policy mechanisms analyzing the interaction between carbon reduction and renewable support policies. Using an agent-based model this research investigates how energy policy affects the investment decisions of generating companies by changing the profit and risk profiles of investment projects. Two econometric analyses are also presented which investigate the behavior of market participants in green certificate markets. These studies analyze the impact of regulatory uncertainty on the volatility of green certificate markets and the impact of regulatory frameworks on pricing behavior. Finally, this thesis proposes a novel approach to improve the performance of green certificate markets by providing more stable and predictable revenues for producers, lowering project risk. The proposed mechanism combines traditional certificate markets with a system of call options purchased in centralized auctions by the regulator