IEA urges fix of renewable energy subsidies
By JAMES HERRON
Governments offering financial incentives to renewable energy generation technologies must do more work to make this support more cost effective, the International Energy Agency said Wednesday.
Feed-in tariffs, a direct subsidy paid to renewable electricity generators based on the amount of energy produced, have proved to be the most effective mechanism to support wind and solar power between 2001 and 2009, the IEA said in a report on the state of the industry.
"For wind, the indicators show that for the period 2001-2009, feed-in tariffs were significantly more effective in stimulating deployment," than schemes based on tradeable certificates, such as the UK Renewables Obligation, said the report. That difference has diminished in recent years as onshore wind has become a mature technology, it added.
However, the amount of power generation capacity eligible for these tariffs must be carefully controlled, to avoid the cost of subsidies rising excessively, the IEA warned.
This has occurred with subsidies for solar photo-voltaic panels in the Czech Republic and Spain, said Didier Houssin, the IEA's Director of Energy Markets and Security.
In these countries, subsidies remained in place even as the cost of deploying solar panels fell rapidly, the report said. "With tariffs remaining high at a time when system prices were falling rapidly, [solar] PV expansion grew dramatically in 2010 in the Czech Republic," it said.
The cost of this was equivalent to almost 18% of the total wholesale value of the entire Czech power system, it said.
Germany, Italy and Spain have also experienced high costs from solar subsidies, the report said.
These problems can be avoided by quickly adapting subsidy policies as technologies evolve and their costs fall, said Houssin.
Dow Jones Newswires
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