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Why Feedin Tariffs are the wrong subsidy

by Thomas
Sun Jan 8th, 2012 at 07:25:34 AM EST

The main tool used to clean up electricity generation lately has been to guarantee certain minimum price levels for power generated with specific technologies. These feedin tarrifs have varied from "not that much more than typical production costs for baseload" (wind) to "insanely high" (solar), but they have all been aimed at getting specific green generating technologies manufactured and deployed, and forcing utilities to buy the power they produce, in the hope that this would help transform electricity production into a clean, reliable grid.

There is a number of problems, however. These tarrifs have gotten quite considerable amounts of renewable capacity built, but because the tarrifs were set per technology, rather than simply being a fixed rate for any low-carbon generation, they amounted to politicians dictating technology choice. Badly. A lot of what has been built was, and will forever be, complete lunacy. Rooftop solar in northern europe is never, ever, going to make sense. Looking outside is a sufficient demonstration of this. - that could be easily fixed, of course. A "secular" tarrif uniform across technologies would not cause people to pour billions down dead ends.

The more serious problem is the investment decisions that utilities are taking due to forcible addition of intermittent generation to the grids they operate.

frontpaged with minor edits - Nomad

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