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The Last Stand Of Renewable Energy Subsidies?

The clean energy chorus now takes the stage as the pro and con arguments are being heard loud and clear for either maintaining or eliminating renewable energy subsidies.

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As reported by GTM, a recent report from the International Energy Agency on transitioning policy frameworks for renewables.

IEA researchers argue that renewable energy projects will continue to need some form of policy support to ensure bankability. In stark terms, bankability is the fuel that drives investment in clean energy projects, and without it investors will be hesitant to put their money at risk.

“As rapidly scalable renewable energy technologies, such as solar and wind energy, are increasingly becoming the least-cost options for new electricity supply, we are entering a new phase of RE policy.

‘The cost-competitiveness of RET with conventional technologies, however, does not indicate that policymakers can withdraw all forms of policy that support investment in these technologies and still achieve sustained growth. This report presents a novel, overarching framework to help policymakers understand the evolution of RE policy, one that attempts to outline a number of potential pathways forward to adapt to the rise of renewables.’

While some governments seek scaling back the subsidies which have fueled the growth of renewable energy technologies to date — such as feed-in tariffs, tax credits, and in the case of distributed resources, net metering — questions about the viability of projects arise. These developments hint at a larger shift away from subsidies targeting wind, solar and other specific technologies.

The IEA report cites three policy elements which will drive renewables’ growth:

  • Maintaining the bankability of renewable energy projects
  • Enhancing the flexibility of the power system
  • Establishing a long-term vision for a sustainable power system

Elsewhere, Britain’s Renewable Energy Association (REA) states the UK solar market must “unlock” deployment on commercial buildings if the technology is to continue its cost-reduction path to a subsidy-free future.

In the UK, the REA has published its annual Renewable Energy View report, compiled in conjunction with Big Four consultancy firm KPMG and Innovas, which provides an overview of the domestic renewable energy sector and the risks posed by changes in policy, pv tech has written.

“Hailing solar PV’s record for exceeding expectations as “second to none”, the report discusses the uncertain future the technology faces in the UK given the government’s subsidy reset which has seen the Renewables Obligation and feed-in tariff schemes closed and cut respectively.”

With renewable electricity now showing  low cost in many energy markets, subsidy opponents are now asking to have the playing field leveled, even eliminating subsidies altogether.

In a recent interview with The Wall Street Journal, Tom Phillips, representing Americans for Prosperity, established a goal for Congress to eliminate all energy subsidies:

“Getting rid of all subsidies for every form of energy—oil, natural gas, wind, solar, everything. Let’s get government out of the business of picking winners and losers in the marketplace.

“In the end, you’ll get a better energy product for Americans. But you’ll also lessen the cronyism that we too often see coming out of Congress, whether it’s Solyndra, where the money you get, frankly, is based on how good your lobbyist is and how well-connected to some member of an administration he or she is.”

It is apparent opinions on this issue are abundant. We shall see how this plays out in the future. Key factors to consider include climate change, bankability, business viability, and government support.

Image via Shutterstock




4 comments
  1. cutter1954

    I presume when AFP says eliminate all the subsidies they include the external pollution costs of,in the case of coal alone,~1/3 to 1/2 trillion dollars per year for the US.(Harvard school of public health).This is the flip side of investing in “all of the above”.Is the current system of tax credits ideal or rational?Obviously no,a significant carbon tax/fee would be better.The Republican house just voted against that idea.Their plan seems to be do nothing at all.If one thought the problem serious one would employ both carrots and sticks,like WW ll.

  2. Matt

    Now the big GOP question. Why is cutting RE support “ending cronyism” but ending fossil fuel support is “raising taxes”?

  3. Matt

    I do not agree, what is more important would be to remove ALL government support for fossil fuel and add a real carbon fee/dividend system. Fee should be at least 3 times current health estimates and then go up from there.

  4. Frank

    Oh yes, let’s get rid of all subsidies, starting with free polution, and then continue with having the government hold the money for remediation of mines and wells, instead of letting companies make promises they may not be able to keep.

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