Analyzing Renewable Energy Policies – Using the Pay-Off Method to Study the Finnish Auction-Based Renewable Energy Policy

Abstract

Design of support-mechanisms is an important component of renewable energy policy. In order to be able to choose desirable designs one must have a good understanding of the most likely outcomes from different policy designs – this calls for proper before-implementation policy analysis and especially for analysis the results of which are intuitively understandable for the decision makers. We propose a simple process, based on the fuzzy pay-off method, for the purpose of analyzing renewable energy support designs in the context of auction-based support mechanism implementation. A numerical case from Finland is used to illustrate the proposed process. The results show that the process is relatively simple to use and able to produce intuitively understandable relevant information for design selection.

Keywords: fuzzy pay-off method, renewable energy, investment valuation, auctions, Finland