Imperfect information and incentives for renewable energy

To realise climate goals, many governments provide subsidies to renewable-energy investors. While these subsidy expenditures are already considerable, the share of renewable energy remains modest. Given that future targets are highly ambitious, realising the energy transition will only demand more policy interventions. What role can energy markets play in keeping the associated costs under control?

This thesis aims to contribute to the organization of an efficient energy transition, by analysing energy markets and the potential problem that information asymmetry plays in causing underconsumption of non-renewables. The thesis first investigates whether energy users, who are confronted with asymmetrical information, prefer renewable energy to the extent that renewables can command a premium, which would curb the need for subsidies. Next, the thesis investigates whether the existing solution for information asymmetry, green certificates, is functioning properly. Finally, the dissertation investigates subsidy-scheme designs in relation to the asymmetrical information of the government and investors about the minimally required subsidy that makes a renewable-energy project profitable. Overall, this thesis shows that (i) many individuals are willing to contribute financially to reducing emissions, (ii) firms require financial incentives for them to be willing to contribute to reducing emissions, (iii) reducing information asymmetry can play a key role in the reduction of emissions, and (iv) improving the design of subsidy schemes can contribute to realising a cost-efficient energy transition.