Don't Just Take it From Me: IEA Warms Up to Feed-in-Tariffs for Renewable Energy

solar panel sunset photo
photo: Bernd Sieker

As Renewable Energy World correctly points out, the International Energy Agency "isn't exactly a hotbed of progressive thought" when it comes to renewable energy. But it seems that the IEA is slowly coming around. In a recent report the agency touts the benefits of feed-in-tariffs as a comparatively inexpensive and effective tool in promoting renewable energy deployment.

This is what the agency says about the impact of feed-in-tariffs on promoting solar power:"Very Effective in Germany"

Feed-in tariffs (complemented by the easy availability of soft loans and fair grid access) have been very effective in Germany, albeit at a high cost (US $0.65/kWh). In recent years, the level of the German FIT for solar PV has decreased to some extent, and an element of degression has been introduced. The German parliament has approved proposals for acceleration of degression rates for stand-alone installations from 5% per year in 2008 to 10% per year in 2010 and 9% from 2011 onwards. This creates incentives to reduce costs, and hence move down the learning curve.

I find it interesting that while the IEA correctly notes the high cost of the tariff per kilowatt-hour, it doesn't mention the average additional cost to the consumer which is adds very little to the average family's electric bill.

In commenting on wind power feed-in-tariffs, the report had this to say:

Higher Stability, Lower Risk

The group of countries with the highest effectiveness (Germany, Spain, Denmark and, more recently, Portugal) used feed-in tariffs (FITs) to encourage wind power deployment. Their success in deploying onshore wind stems from high investment stability guaranteed by the long term FITs, an appropriate framework with low administrative and regulatory barriers, and relatively favourable grid access conditions. In 2005, the average remuneration levels in these countries (US $0.09-0.11/kWh) were lower than those in countries applying quota obligation systems with tradable green certificates (TGCs) (US $0.13-0.17/kWh).

Beyond some minimum threshold level, higher remuneration levels do not necessarily lead to greater levels of policy effectiveness. The highest levels of remuneration on a per-unit generated basis for wind among the countries studied are seen in Italy, Belgium, and the United Kingdom, which have all implemented quota obligation systems with TGCs. Yet none of these countries scored high levels of deployment effectiveness. This is likely related to the existence of high non-economic barriers as well as to intrinsic problems with the design of tradable green certificate systems in these countries, which cause higher investor risk premiums.

While the idea of a feed-in-tariff probably smacks too much of people's idea of socialism to gain much acceptance in the United States at the moment. If a recent proposal coming out of Gainesville, Florida to implement a feed-in-tariff for solar power gets approved, and proves successful, perhaps people's attitudes towards this type of renewable energy promotion will shift.

via: Renewable Energy World
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Tags: Renewable Energy | Solar Power | Wind Power


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