Transaction Cost Analysis of Feed- in Tariff Schemes: The case of Solar PVs in the UK

Abstract: In order to exploit the renewable energy (RE) and climate mitigation potential, transaction costs (TCs) of implementing RE technologies need to be better understood and eventually scaled down. The objective of this thesis is to identify and analyze the nature of TCs borne by obliged parties under the recent “Feed-in Tariff” (FIT) scheme in the United Kingdom. In addition, the findings are compared with ones from the existing literature in order to examine their consistency and to explain potential divergencies.Taking as a case the small-scale solar PV projects, a number of sources of TCs were identified in the different phases of the life-cycle of the scheme including: i) planning, ii) implementation and iii) monitoring and verification phase. Results show that the most significant souces of TCs costs occur in the implementation and monitoring phases and are related to baseline development, administration and certification and monitoring activities. The actors who endure them are the obliged FIT energy suppliers and the authorities.The analysis also reveals that findings are generally consistent with other studies in the field. However, negotiations were not identified as a major source of TCs as in most of other cases. Standardization of the data collection process and of monitoring activities is suggested as a strategy that could front and potentially reduce TCs. Finally, it is concluded that several endogenous and/or exogenous factors determine the nature of TCs even under FIT schemes and consequently a further analysis which would include an estimation of their scale seem to be necessary. Keywords: Renewable energy; solar PV; feed-in tariffs; transaction costs