Which policies boost renewable energy markets?

Introduction to renewable energy policy 

Why does policy matter so much in the development of the renewable energy market? This is in part due to the regulation, expense and uncertainty of the power industry - policies that prioritise the renewable energy market cause the market to grow, technology to advance and innovation to occur. This bolstering of the sector via policy can be financial - for example, through the introduction of financial incentives, which can help to roll out technologies in different regions and encourage innovation through investment in fledgling green projects. Regulatory frameworks can help to solidify the market and level the playing field for new renewable providers, as well as provide transparency for buyers of energy from renewable sources, specifically in wind farms, solar plants, and battery storage systems. We’ll take a look at European and global renewable policies, focusing on how each tool encourages investment and long-term growth in the sector. 

Financial incentives that accelerate growth 

For renewable energy to flourish, financial incentives are crucial for allowing investment and the development of new projects.  

Feed-in tariffs (FiTs) and their evolution 

Designed to encourage renewable energy generation, the Feed-in Tariffs (FiTs) were introduced in 2010, and their implementation charged licensed electricity suppliers for the energy they exported. FIT applied to two parties, generators, who owned the power plants and the licensed electricity suppliers. The renewable sources it applied to included solar, wind, micro combined heat and power, hydro and anaerobic digestion. The FIT scheme remained open to applicants until 2019.  

Tax credits and grants for renewable investments 

Tax credits and grants include models such as the R&D Tax Credits, which encourage research and development of technical challenges specific to the renewable energy sector, such as solar panel material development, battery storage optimisation and biofuel research. The tax credit allows applicants to claim back 33% of expenses related to research and development.  

Green bonds and public funding schemes 

Green bonds enable a private or public company to utilise loaned funds to support environmentally responsible projects, such as a fleet of electric vehicles. This ‘debt’ - or socially responsible investments -  allows green companies to finance themselves, and the debt itself can be bought or sold by other parties. The benefit of investing is that interest is fixed.  

Market-based mechanisms and pricing tools 

A suite of market-based instruments helps make the green energy market more transparent, stable, and desirable to invest in.  

Renewable Energy Certificates (RECs) and GOs 

Crucial to transparency are verification instruments for companies investing in renewable energy. Renewable energy certificates and Guarantees of Origin allow businesses to verify that the energy they consume has been generated by a renewable source. Although the names for these certifications aren’t interchangeable, they serve the same basic task: verifying the origin of an energy source. The difference lies in the region from which they originate. For example, RECs are used in the USA, while GOs are used in the UK, and they usually can’t be transferred across borders.   

Carbon pricing and emissions trading systems (ETS) 

Trading schemes on the energy market have been introduced historically to help smooth out volatility. The UK ETS promotes cost-effective decarbonisation, allowing companies to reduce carbon emissions where it is most economically feasible to do so through an annual auctioning method.  

Net metering and dynamic pricing 

Net metering and dynamic pricing are both designed to optimise the market regarding pricing renewable energy. Net metering allows everyday residential power generators - for example, home solar panels - to sell back to the grid excess power that they’ve generated for a discount on bills. Dynamic pricing varies the actual, real-time prices of energy to encourage consumers to shift their high-energy activities during off-peak periods - for example, putting the washing machine on overnight - alleviating strain on the grid.  

Regulatory frameworks that enable market access 

Streamlined permitting and licensing open up the market to new contenders in the energy market by removing barriers to access. Grid access regulation and interconnection guarantees that prioritise renewable energy, ensuring new renewable projects and initiatives can achieve grid access, thereby providing wider access to new types of renewable sources. Auction-based procurement has also prioritised, including the increased uptake of elements such as PPAs and tenders, which encourages competition, opens up the market, and makes the purchase of energy more economical.  

Examples of successful policy models for renewable energy

Different regions have implemented policy models focusing on different elements of renewable energy support, with varying results.  

Germany’s EEG (Renewable Energy Act) 

The EEG has seen the implementation of priority grid access for renewable energy in Germany, secure financing for renewable energy pricing allowing it to become more competitive with fossil fuels and a successful feed-in tariffs scheme, which increased renewable energy to 23.7% in 2014 from 6.2% in 2000, framing Germany with the potential for Germany to be 100% renewable energy-powered by 2030.  

EU Green Deal and Fit for 55 package 

The Fit For 55 Package places the responsibility for carbon emissions on the producer of the carbon emissions, or the manufacturer, such as car producers and manufacturers. It also includes ambitious energy efficiency targets, such as reducing consumption by 11.7% by 2030. It links directly with a number of the targets that make up the European Green Deal, for example, its aim to transition Europe towards climate neutrality.  

Policy gaps and areas for improvement 

Overall, there is a global lack of policy consistency across different regions, with various countries focusing on distinct goals, and a notable absence of long-term planning to unify these objectives. Regulatory hurdles are particularly prevalent in certain areas of renewable energy generation - for example, storage and hybrid projects - and there are distinct challenges in emerging markets where research and development are under-invested.  

Strong, consistent policies are key to scaling renewables—closing gaps, enabling investment, and ensuring a global shift toward clean energy.