wind energy even under a stable policy environment combined with reasonably high feed-in tariffs.” 9 In 2013, Zhang found that“[m]oving from no guaranteed grid access to guaranteed grid access can almost double wind installations in one year, ceteris paribus ; extending the contract length by an additional one year of an original 5-year agreement will on average increase wind investment by 6% annually. … A predictable long-term policy commitment is likely to be more effective than excessive short-run fiscal incentives to attract investment.” 10 Thus, while the tariff itself is obviously important to ensure success of a RE support scheme, as it defines the potential rent, it is by no means sufficient to incentivize investments. Getting the Tariff Right The tariff is usually a fixed amount of money, though it can also be e.g. a premium paid in addition to the electricity market price. In the most basic form of a FiT, the producer of renewable electricity does not act on the free market, but feeds electricity into the grid and receives the fixed tariff for each unit of electricity(kWh) provided. Depending on FiT design, different parties can be legally responsible for compensating the generators of RE – these include the utility or the grid operator. The utility or grid operator typically passes the difference between the FiT and the wholesale price of electricity on to the consumer. The burden of paying the tariff is thus evenly distributed among energy consumers. It might be higher for some if exemptions are granted for others: exemptions may be considered necessary e.g. for energy intensive industries to avoid competitive disadvantages internationally, and the respective risk of“leakage” of certain industries. 11 The challenge of designing a FiT for policymakers is that they must set the tariffs without knowing to what degree the financial incentive will incentivize RE investment and expansion – they can only go by current prices for RE materials and running costs of production units, estimating how much the tariff incentive will drive these down over time. They aim for a tariff level adequate to achieve the intended rate of RE 9 Resch et al.(2007), pp. 27 sqq. 10 Zhang(2013), p. 4. 11 Leakage refers to a shift of production or investment(and hence also jobs and greenhouse gas emissions) from a jurisdiction with stringent climate protection policies to one with less stringent ones. 7