The role of responsiveness in deployment policies: A quantitative, cross-country assessment using agent-based modelling

Abstract

A rapid, global diffusion of clean energy technologies is central to the efforts to curb global carbon dioxide emissions. Deployment policies based on economic incentives have proved effective in accelerating the uptake of renewable technologies, such as solar photovoltaics, and could quicken the adoption of others. However, their outcomes were often uncertain and costly as many countries struggled to adjust incentives while technology prices fell rapidly. This study addresses this challenge by investigating the role of responsiveness – the policy’s ability to react to changes in the context in which it operates – in the design of mechanisms for adjusting incentives over time. This paper employs an agent-based model to evaluate quantitatively six policy designs with varying degrees of responsiveness for adjusting a feed-in tariff for solar photovoltaics in three countries – Germany, Spain, and Switzerland – for over a decade. Our first finding confirms that more responsive policy designs tended to produce policies that meet their goals more accurately and certainly. Between the least and the most responsive designs, deviation from policy goals was reduced by 60% and uncertainty was reduced by more than 50%. Our results also suggest that policy responsiveness could have diminishing returns: improvements in the policy’s accuracy and certainty tended to become smaller while policy costs per capita tended to become larger as design responsiveness increased. Finally, simulation results show how country-specific attributes influence the diffusion pattern of the technology. These findings have major implications for the design of future deployment policies supporting the diffusion of clean energy technologies.