Renewable Energy Investments and Feed-in Tariffs: Firm-Level Evidence from Southeast Asia

We examine the impact of feed-in tariffs (FITs) on promoting investments in renewable energy (RE) in Southeast Asia. Using a unique annual firm-level dataset from six Southeast Asian economies from 2012 to 2021, we find robust evidence that FITs in Southeast Asian economies substantially boost firms’ investments in RE. Moreover, the impact of FITs on RE investments varies across RE technologies. We find significant and positive impacts of a solar FIT on promoting investments in RE, but such impacts are insignificant for FITs on other RE technologies including wind and biomass, geothermal, and hydro technologies. Further, the impact of FITs on RE investment is more pronounced among younger and smaller firms than in older and larger firms. Our empirical evidence has implications for policy makers in tailoring the design of new FITs to promote private sector investments in RE.

First published in ADB.org.