Capital Necesario Unitario, Tablas de Mortalidad y Tasas de Interés

The energy system, and more specifically for this thesis the electricity generation, is an object for political decision-making. National governments have generally two ways to go. They can push a policy that prohibits a kind of electricity production, or a remuneration policy that rewards the producers of a certain type of electricity (Haas et al., 2004). In order to meet the emission and CO2 requirements, several nations are

banning energy generation with fossil fuels by law. However, these bans are not immediate, but instead followed by a period of phasing down before a total phase out can be realised. Problems with this kind of policy is that if there is no existing substitute, they are not possible to carry out without additional investments (Green & Staffell, 2016). Remuneration policies, on the other hand, are instantaneous and instead of banning anything, they encourage new installation of renewable energy by the promotion of profitable investments in renewable energy. The regulatory methods can be divided in to two categories, price-driven and capacity-driven methods. In the price-driven methods, the price of electricity is set and then the market determines the quantity. On the contrary, in capacity driven methods, the quantity is first set and the price is decided by the market (Haas et al., 2004). The four major types of programs used to encourage renewable energy production are: feed-in tariffs (FIT) and tax incentives, both price-driven methods, and green certificates and competitive bidding, both of which are capacity-driven methods (Haas et al., 2004; Sarasa-Maestro, Dufo-López & Bernal-Agustín, 2013). The costs of remuneration policies are generally paid by the electricity consumers, so they should always aim to minimise the economic strain set on the public (Haas et al., 2004). Below a short presentation of the different political control methods that were mentioned.

2.8.1. Feed-in tariff (FIT)

The type of remuneration policy which is considered as the most effective, when it comes to promoting for investments and development in RES, is FITs. The central principle of FITs is that the government obligates the transmission system operators to feed in all the produced renewable energy at politically governed prices. In this way, the producers are guaranteed a fixed price, for a specified period of time, for specified types of electricity production. The electricity prices that are offered, may vary depending on the technology that is used, the capacity of the plant, location, and other project-specific variables. The value of the tariffs might also decrease over time. The tariffs may be either fixed tariffs, where the price is set above the market price, or as a bonus tariffs, which are added to the prevailing market price. The tariffs are intended to cover for the disadvantage derived from the use of RES (Couture & Gagnon, 2010).

2.8.2. Tax incentives

Tax incentives includes all the tax-related actions a government can utilise in order to make RES more attractive investments. The different actions comprise of reduced taxes, which help the producers to generate profit, tax credits, which make some of the revenue object for deduction, and accelerated depreciation, which result in less taxable income in the early years of the operation. All of these gives the investors a greater yield than the investment normally would, thus, making these investments more appealing than without the tax incentives (Sarasa-Maestro, Dufo-López & Bernal-Agustín, 2013).

2.8.3. Green certificates

Another possible system to steer the electricity generation is green certificates. Under it, the government aims to control the ecological effectiveness by ensuring a certain amount of the generated electricity is generated using renewable sources. In order to achieve this, the producers, distributors or consumer are either obligated to produce or buy a certain amount of the renewable electricity. The amounts are expressed as absolute values or as quotas. The certificates are issued according to renewable electricity generation. The producer has then two different sources for income. First, when selling the electricity to the market at the market price, and second, when selling the earned green certificates to the certificate market. Since renewable energy generation is generally more expensive than the use of fossil fuels of nuclear power, the producer is likely to make a loss. In order to make up for this loss the green certificates are sold at a price that gives the producer a profit. A separate certificate controlling authority is generally needed in order to make the system work in practice (Ringel, 2006).

2.8.4. Competitive bidding

In competitive bidding, the government holds public auctions for set amounts of electricity, which must be generated annually. Different projects will then tender with the lowest price they will accept for their output, and the project that gives the lowest price wins. The government does not fund the building of the production facilities, but instead they are obligated to buy all the auctioned output for the price that won the bidding. The producers have to take in to account the building expenses and the limited time of the

guaranteed price they get. When the time is up, there is no assurance on the price or amount they will sell, since both are determined by the market at that point (Toke, 2015).