Payment systems

Payment systems are used to correct imperfections in the electricity market in order to attract investment in wind power or other clean energy technologies.

 

Different systems may be relevant depending  on the market circumstances. Systems employing fixed tariffs have been very effective starting up markets in e.g. Germany and Denmark. As the electricity markets are liberalised it is natural to turn to market based systems such as tradable green certificates and public tender.

 

The Danish Wind Industry Association works for a continued development of EU’s internal energy markets with mechanisms that ensure a fair payment to wind power to reward the environmental benefits. In the future, this could be by means of tradable green certificates.

 

In general, the following payment systems are employed:

• Feed-in tariffs - fixed price or a premium added to the market price per kWh
• Tender over an amount of energy (kWh) or a certain kapacity (kW)
• Tradable green certificates issued to the producers and a corresponding obligation (quota) among the consumers to buy a certain amount of certificates
• Tax incentives
• Investment subsidies

Payment systems can be arranged according to their focus on either market demand or supply as well as their focus on either production (kWh) or increasing capacity (kW).

 

Related links:

EWEA – EU’s internal electricity market and a detailed description of different payment systems

Economy and investment in wind power