Renewable Tariff Design & Model Policies

Renewable Tariffs in Germany, France, and Spain are derived from the cost of generation plus a “reasonable profit”.

This is quite similar to the concept of “cost recovery” that had been used in utility rate regulation in North American for many years. Regulatory commissions determine the costs of generation from a technology or a particular power plant and then determine what is the revenue required to earn a profit based on these costs.

Regulatory commissions also determine what the acceptable or “reasonable” rate of return that is permitted to a utility based on the cost of capital.