Germany Demonstrates The Benefits of Inteligent Subsidies
According to Wikipedia, a Feed-in tariff is a “policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology.” In other words, it is a type of subsidy that encourages people and companies to investment in renewable energy production (wind, solar PV, hydroelectric) by guaranteeing the price they will get for the electricity they put in the power grid.
In Germany, the use of feed-in tariffs for electricity produced by solar photovoltaic (solar PV) panels has had two benefits. First, it has helped Germany become a leader in the production of solar power. This is despite the fact that, due to its northern latitude and climate, it receives much less solar energy than, say, Canada.
Second, it has helped bring down the cost of solar PV panels. According to a recent post at thinkprogress.org, “The average price of an installed solar system in Germany came to $2.80 in the third quarter of 2011. In the U.S., it was about $5.20 in the third quarter.”
The German feed-in tariff was designed to be gradually phased out and the beginning of 2012 will bring a 15% reduction in the feed-in tariff. As a result, December 2011 alone saw the installation of 3 gigawatts of solar PV systems in Germany. To give you an idea of how large that is, the USA installed 1,7 gigawatts of solar PV systems in all of 2011! (Canada installed about 0,4 gigawatts.)
Subsidies of any kind are meant to be temporary financial support for technologies that are deemed to be good for a nation. Countries like Germany (solar) and Denmark (wind) that have implemented intelligent subsidies for renewable energy are reaping the benefits. Not only have their subsidies helped develop the “green” sector of their economies (jobs, jobs jobs!), they have also helped put those countries on the right track to developing a low-carbon energy infrastructure.
And to those who think that renewable energy source “need” subsidies in order to compete with fossil fuels, note that fossil fuel subsidies better renewable energy subsidies at a ratio of about 6 to 1, worldwide. Just imagine what could be done to tackle climate change if we could move those dollars from the fossil fuel industry to the renewable energy industry.