Feed-in tariff vs. renewable portfolio standard: An empirical test of their relative effectiveness in promoting wind capacity development

This paper examines the relative effectiveness of feed-in tariff (FIT) and Renewable Portfolio Standard (RPS) in promoting wind capacity development using panel data. Conservative estimates suggest that, on average across countries, FIT increases total wind capacity more than RPS by a magnitude of about 1800 MW. When using time variant policy indicators, the difference between the two policies increases to nearly 2000 MW, roughly 8% of 2009 cumulative capacity in Germany. As for annual wind capacity since 2005, this paper has found no significant difference between FIT and RPS. It is also found that wind energy development responds to high electricity demand and high oil dependence. - Highlights: ► Examined the relative effectiveness of FIT and RPS in promoting wind capacity. ► FIT increases total wind capacity more than 1800 MW than RPS across counties. ► RPS is catching up with FIT for annual wind capacity in recent years. ► Wind development also responds to high electricity demand and oil dependence.