The Relative Effectiveness of Alternative Financial Incentive Policies in Enhancing the Role of Renewable Energy Aid

This study examines the effectiveness of financial incentive policies (FIPs) in enhancing the utilization of renewable energy official development assistance (ReODA) in developing countries. The analysis is based on panel regression models using data from 2010 to 2020. The study finds that Grants and subsidies among the FIPs has a positive and significant effect on renewable electricity generation (ReGen) when interacting with ReODA, indicating its potential to enhance the effectiveness of ReODA, whilst Feed-in tariffs/premiums has a negative impact on ReGen. The study suggests that Grants and subsidies, with its greater visibility and transparency, can be a promising financial incentive policy for supporting ReODA in the developing countries, whereas Feed-in tariffs/premiums is not recommended for use in developing countries due to the difficulties in assessing service costs and the cost of transmitting energy. Thus the study recommends considering the visibility and transparency of financial incentive programs to improve their effectiveness.