At least 48 countries—34 developed and transition countries and 14 developing countries—have some type of policy to promote renewable power generation. (See Table 4) The most common existing policy is the feed-in law, which has been enacted in many new countries and regions in recent years. The United States was the first country to enact a national feed-in law (PURPA), in 1978. (Several states actively implemented PURPA but most implementation was discontinued in the 1990s.) Feed-in policies were next adopted in Denmark, Germany, Greece, India, Italy, Spain, and Switzerland in the early 1990s. By 2005, at least 32 countries and 5 states/provinces had adopted such policies, more than half of which have been enacted since 2002. (See Table 5)

Among developing countries, India was the first to establish feed-in tariffs, followed by Sri Lanka and Thailand (for small power producers only), Brazil, Indonesia, and Nicaragua. Three states in India adopted new feed-in policies in 2004, driven by a 2003 national law requiring new state-level policies (the old feed-in laws during the 1990s were gradually discontinued). In the first half of 2005, feedin policies were enacted in China, Ireland, Turkey, and the U.S. state of Washington. China’s feed-in policy was part of a comprehensive renewable energy promotion law enacted in February 2005.[N26, N27]

Feed-in tariffs have clearly spurred innovation and increased interest and investment, notably in Germany, Spain, and Denmark over the past several years. For example, power from eligible forms of renewable generation under Germany’s feed-in law more than doubled between 2000 and 2004, from 14 TWh to 37 TWh. In several countries, feed-in policies have had the largest effect on wind power, but have also influenced biomass and small hydro development. (Most laws set a limit on maximum size of eligible hydro, for example 5 MW in Germany.) Most recently, Spain’s feed-in tariff has helped new investment plans for solar thermal power generation (decisions for two 50 MW plants were expected in 2005).

Feed-in tariffs vary in design from country to country. Some policies apply only to certain technologies or maximum capacity.Most policies establish different tariffs for different technologies, usually related to the cost of generation, for example distinguishing between off-shore and onshore wind power. Some policies also differentiate tariffs by location/region, year of plant operation, and operational season of the year. Tariffs for a given plant may decline over time, but typically last for 15–20 years. Some policies provide a fixed tariff while others provide fixed premiums added to market- or cost-related tariffs (or both, as in the case of Spain).

Renewables portfolio standard (RPS) policies are expanding at the state/provincial level in the United States, Canada, and India. (See Table 6) At least 32 states or provinces have enacted RPS policies, half of these since 2003. Eight new U.S. states (and the District of Columbia) enacted RPS policies in 2004–2005, bringing to 20 the number of U.S. states with RPS. Likewise in India, five new states enacted RPS policies in 2004–2005, bringing the total number of states to six (the Indian 2003 Electricity Act allows states to set minimum shares from renewables). Canada has three provinces with RPS policies (and several more with planning targets).Most of the above RPS policies require renewable power shares in the range of 5–20 percent, typically by 2010 or 2012.Most RPS targets translate into large expected future investments. One study estimates that state RPS laws currently existing in the United States would require an additional 52 GW of renewable energy by 2020, which would more than double existing U.S. renewables capacity.*1[N28]

There are also six countries with national RPS policies, all enacted since 2001. Australia’s RPS (2001) requires utility companies to submit a certain number of renewable energy certificates each year (1.25 percent of generation was required for 2004, or about 2,600 GWh total); this requirement will be adjusted each year to eventually lead to Australia’s national target of 9,500 GWh by 2010. The United Kingdom’s RPS (2002) will lead to 10 percent by 2010 and then to 15 percent by 2015, continuing to 2027. Japan’s RPS (2003) also requires a certain percentage from utilities, which increases over time to reach 1.35 percent by 2010. Sweden’s RPS (2003) requires consumers, or electricity suppliers on their behalf, to purchase a given annual percentage, which increases yearly, through either electricity purchases or renewable certificate purchases. (Sweden sets penalties for noncompliance at 150 percent of the average certificate price of the prior period.) Poland’s RPS (2004) will reach 7.5 percent by 2010. Thailand’s RPS (2004) requires that 5 percent of all additional future generation capacity be renewables.*2

There are many other forms of policy support for renewable power generation, including direct capital investment subsidies or rebates, tax incentives and credits, sales tax and VAT exemptions, direct production payments or tax credits (i.e., per kWh), green certificate trading, net metering, direct public investment or financing, and public competitive bidding for specified quantities of power generation. (See Table 4) Some type of direct capital investment subsidy, grant, or rebate is offered in at least 30 countries. Tax incentives and credits are also common ways of providing financial support.Most U.S. states and at least 32 other countries offer a variety of tax incentives and credits for renewable energy.

Energy production payments or tax credits exist in several countries, with the U.S. federal production tax credit most significant in this category. That credit has applied to more than 5,400 MW of wind power installed from 1995 to 2004. Indexed to inflation, that credit started at 1.5 cents/kWh in 1994 and increased over time, through several expirations and renewals, to 1.9 cents/kWh by 2005, with expiration extended to 2007. The production tax credit has helped to make wind power a "mainstream" investment in the U.S. in recent years, capturing financier interest in the sector. Other countries with production incentives include Finland, the Netherlands, and Sweden.*3

Policies to promote rooftop grid-connected solar PV exist in a few countries and utilize either capital subsidies or feed-in tariffs, or both (along with net metering). These policies have been clearly responsible for the rapid growth of the grid-connected market in recent years. Japan’s rooftop solar PV policies, which were to end in 2005, provided capital subsidies which started at 50 percent in 1994 but declined to around 10 percent by 2003 and 4 percent by 2005. Those policies resulted in over 800 MW—more than 200,000 homes. Germany, with more than 160,000 rooftop solar homes and almost 700 MW installed, provides a guaranteed feed-in tariff, and until 2003 also provided low-interest consumer loans. Continuing policies in California, other U.S. states, and several other countries (including France, Greece, Italy, Korea, Luxembourg, the Netherlands, Portugal, and Spain) provide capital subsidies (typically 30–50 percent) and/or favorable power purchase tariffs. Korea expects 300 MW by 2011 through its 100,000-rooftop program, which initially provides 70-percent capital subsidies that will decline over time. New solar PV rooftop programs have been announced in several countries, including Hungary and Thailand.[N29]

Some countries or states/provinces have established renewable energy funds used to directly finance investments, provide low-interest loans, or facilitate markets in other ways, for example through research, education, standards, and investments in public facilities. The largest such funds are the so-called "public benefit funds" in 14 U.S. states. These funds, often applied to energy efficiency as well as renewable energy, are collected from a variety of sources, with the most common being a surcharge on electricity sales. These 14 funds, all initiated between 1997 and 2001, are collecting and spending more than $300 million per year on renewable energy. It is expected that they will collect upwards of $4 billion for renewable energy through 2012. The India Renewable Energy Development Agency (IREDA) similarly provides loans and other project financing. China’s 2005 renewable energy law calls for establishing a fund, and Mexico was considering a "green fund" in 2005 to finance renewable energy projects.[N30]

Net metering laws exist in at least 7 countries, 35 U.S. states, and several Canadian provinces. Four additional U.S. states had one or more electric utilities offering net metering. A form of net metering is also occurring in Japan on a voluntary basis. Net metering laws are being enacted regularly, with six new U.S. states passing such laws in 2004. Most recently, a 2005 U.S. federal law requires all U.S. electric utilities to provide net metering within three years. Net metering has been particularly instrumental in facilitating grid-connected solar PV markets in the United States and Japan.[N30]

Policies for competitive bidding of specified quantities of renewable generation, originally used in the United Kingdom in the 1990s, now exist in at least seven other countries: Canada, China, France, India, Ireland, Poland, and the United States. China bid and awarded 850 MW of wind power in 2003–2004 and planned another 450 MW of bidding in 2005. The province of Ontario in Canada bid 1,000 MW of wind power in 2004, and other Canadian provinces were following suit. Utilities in many countries use competitive bidding to meet RPS requirements.[N31]

Other policies include tradable renewable energy certifi- cates, typically used in conjunction with voluntary green power purchases or obligations under renewables portfolio standards. At least 18 countries had schemes and/or markets for tradable certificates.Many other regulatory measures, such as building codes, administrative rules and procedures, and transmission access and pricing, also serve important roles in promoting renewable power generation. Such regulatory measures can be steps towards future renewable energy markets, particularly in developing countries (Mexico and Turkey are examples of countries taking such regulatory measures). Policies for power-sector restructuring, carbon taxes, fossil fuel taxes, and many others can also affect the economic competitiveness of renewable energy.