INTRODUCTION

The production and use of electricity generated by fossil fuels is one of the most environmentally damaging human activities on this planet. It is generally acknowledged that increasing the share of electricity generated by renewable energy is vital for reducing the environmental impacts of electricity generated by fossil fuels and achieving sustainable development. Protection of the environment is a key reason for the introduction of government policies encouraging the development of renewable energy through mechanisms such as tax and other financial incentives and the mandatory purchasing by electric utilities of electricity generated from renewable energy sources in developed countries since the 1970s.

More recently, the deregulation and/or privatization of energy markets in many countries, including the United States, United Kingdom, Canada, Australia, various European countries, and the countries of Latin America, has led to concerns about the future of renewable energy resources in the generation of electricity. As utilities in competitive electricity markets become more efficient, reduce costs, and charge lower electricity prices, it is feared that renewable energy sources, which are generally higher cost options for producing electricity, will find it increasingly difficult to penetrate electric power markets.

While proponents of renewable energy have pressed for government support of renewable energy to continue in competitive electricity markets, the suitability of applying policies for promoting renewables in regulated electricity markets to deregulated markets has been questioned.