The Role of Policy Driven Incentives : A Cross-Country Analysis
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World Bank, Washington, DC
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This paper presents new global evidence
on the key determinants of public-private partnership
investment in electricity generated by renewable energy
based on a panel data analysis for 105 developing countries
over a period of 16 years from 1993 to 2008. It aims to
identify the key factors affecting the private
investor's decision to enter renewable-based energy
generation, through a probit analysis and the amount of
investment sunk in this market segment, based on
Heckman's sample selection analysis. One of the key
results of the paper is that the market for renewable-based
energy is strongly driven by supportive policies. Support
policies serve not only to attract the entry of private
investors, but also to determine the level of investment. In
the latter case, its impact is less significant, suggesting
the need over time to revisit the power of the incentive
schemes, as well as the implied allocation of risks between
the public and private sector to ensure that feed-in tariffs
produce the desired amount of investment. In contrast,
broader economy-wide governance factors, including control
for corruption and degree of political competition, are
considered by private investors mainly for taking the
decision to enter into renewable-based generation. This
reinforces the expectation that private investors seem to be
adequately protected against their risks, so that once they
have entered the market, they can accommodate the governance
environment. Private investors in renewable-based energy
also require technical and regulatory certainty about the
availability of renewable-ready transmission resources, if
they are to finance investments. Private investors entering
the market look more at the size of the market rather than
the income level, whereas when determining the level of
investment they assess both the size and
"affordability" level. This raises some concerns
on the sustainability of support mechanisms and their
financing, particularly when the incremental costs implied
by renewable-based generation are passed through to consumers.
Palabras clave
ABUNDANT RESOURCE, ACCOUNTING, AGRICULTURAL RESIDUES, ALLOCATION OF RISKS, APPROACH, AVAILABILITY, AVAILABILITY OF CREDIT, BARRIER, BIOGAS, BIOMASS, BIOMASS CAPACITY, BUSINESS ENVIRONMENT, CARBON, CLEAN ENERGY, CLIMATE, CLIMATE CHANGE, CO2, COAL, COGENERATION, COGENERATION PLANTS, COMPETITION FOR ENERGY, COMPETITIVE MARKET, CONSTRUCTION COST, COST OF CAPITAL, COST REDUCTIONS, DEBT, DEBT MATURITY, DEBT SERVICE, DEMOCRACY, DEMOGRAPHIC, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DIESEL, DIESEL FUEL, DIFFUSION, DISTRIBUTION LOSSES, DUMMY VARIABLE, ELECTRIC UTILITIES, ELECTRICAL OUTPUT, ELECTRICITY, ELECTRICITY FROM WIND, ELECTRICITY GENERATION, ELECTRICITY PRICE, ELECTRICITY PRODUCTION, ELECTRIFICATION, EMERGING ECONOMIES, EMISSION, EMISSIONS, ENERGY DEMAND, ENERGY GENERATION, ENERGY INVESTMENTS, ENERGY RESOURCES, ENERGY SECURITY, ENERGY SOURCE, ENERGY SOURCES, ENVIRONMENTAL FINANCE, ENVIRONMENTAL SUSTAINABILITY, EQUAL SHARE, EXPLORATION DRILLING, FINANCIAL ANALYSIS, FINANCIAL CRISES, FINANCIAL CRISIS, FIXED RATE, FOSSIL, FOSSIL FUEL, FOSSIL FUELS, FUEL COST, FUEL PRICE, GAS, GAS PRICES, GEOTHERMAL ELECTRICITY, GEOTHERMAL ENERGY, GEOTHERMAL FLUIDS, GEOTHERMAL POWER, GEOTHERMAL POWER PLANTS, GEOTHERMAL PRODUCTION, GEOTHERMAL RESERVOIR, GEOTHERMAL RESOURCE, GEOTHERMAL RESOURCES, GEOTHERMAL TECHNOLOGIES, GLOBAL INVESTMENT, GOVERNANCE INDICATOR, GOVERNANCE INDICATORS, GOVERNMENT GUARANTEES, GREEN POWER, GRID CONNECTION, GROWTH IN ENERGY DEMAND, HYDRO POWER, HYDROPOWER, INCOME, INCOME LEVEL, INFLATION, INSTRUMENT, INTERNATIONAL BANK, INVESTMENT REQUIREMENT, IPO, JURISDICTIONS, KILOWATT HOUR, LANDFILL, LANDFILL GAS, LOAN, LOAN GUARANTEES, MACROECONOMIC CONTROL, MACROECONOMIC VARIABLE, MARKET PRICE, MARKET PRICES, MARKET RISKS, MARKET SIZE, MARKET STRUCTURES, NATIONAL GRID, NATURAL GAS, OFFSHORE WIND, OIL, PORTFOLIO, POWER, POWER DEMAND, POWER GENERATION, POWER PRODUCER, POWER PURCHASE AGREEMENTS, POWER SECTOR, POWER SYSTEM, PRICE OF OIL, PRICE VOLATILITY, PRIVATE FINANCE, PRIVATE INVESTMENT, PRIVATE INVESTMENTS, PRIVATE INVESTOR, PRIVATE INVESTORS, PRIVATE SECTOR INVESTORS, PUBLIC-PRIVATE PARTNERSHIP, RAPID EXPANSION, RAPID GROWTH, RATE OF RETURN, REGIONAL DUMMIES, REGULATOR, REGULATORS, REGULATORY REGIME, REGULATORY REGIMES, REGULATORY REQUIREMENTS, RENEWABLE ELECTRICITY, RENEWABLE ENERGIES, RENEWABLE ENERGY, RENEWABLE ENERGY DEVELOPMENT, RENEWABLE ENERGY GENERATION, RENEWABLE ENERGY MARKET, RENEWABLE ENERGY POLICY, RENEWABLE ENERGY PRODUCERS, RENEWABLE ENERGY PROJECTS, RENEWABLE ENERGY SOURCES, RENEWABLE ENERGY SUPPLIERS, RENEWABLE ENERGY TECHNOLOGY, RENEWABLE ENERGY USE, RENEWABLE GENERATION, RENEWABLE PORTFOLIO STANDARDS, RENEWABLE SOURCES, RENEWABLE SOURCES OF ENERGY, RENEWABLE TECHNOLOGIES, RISK PREMIUM, RISK REDUCTION, RURAL ENERGY, SECURITY CONCERNS, SMALL POWER PRODUCERS, SOLAR POWER, SOLAR THERMAL, SOLID BIOMASS, SOURCE OF ENERGY, SUGAR MILLS, SUSTAINABLE ENERGY, TARIFF DESIGN, TARIFF STRUCTURE, TAX, TAX BREAK, TEMPERATURE, TOTAL ELECTRICITY GENERATION, TRACK RECORD, TRANSMISSION SYSTEM, UNEP, URBANIZATION, VENTURE CAPITALISTS, WIND, WIND CAPACITY, WIND ENERGY, WIND FARMS, WIND GENERATION, WIND GENERATORS, WIND POWER, WIND PROJECT, WIND PROJECTS, WIND RESOURCES, WIND SPEEDS, WORLD DEVELOPMENT INDICATORS