Tailor-made subsidies needed until clean energy can compete

November 10, 2011 | 1 min read

‘Green Investing 2011: Reducing the Cost of Financing’ is a report by the World Economic Forum in collaboration with Bloomberg New Energy Finance. It reports a growth of global clean energy investment by 30% in 2010 to a new record of 243 billion dollars. The study observes clean energy subsidies are coming under harsh scrutiny because of expanding deficits and rising national debt in many countries. In some cases, the researchers say these new examinations are merited because governments have paid above-market rates for clean energy generation. Elsewhere, the authors think the concerns have been overblown.

Policy premiums

The researchers examined the fundamental costs associated with generating a clean megawatt-hour of electricity and the role that financing costs play. Next, they looked at existing policy prescriptions from around the world and examined those that have proven successful in reducing developers’ costs. Finally, they compared these new adjusted local costs of generation with the size of local subsidies to determine whether a “policy premium” of over-payment exists.

“Ultimately, there is no one-size-fits-all clean energy policy prescription sure to succeed in every part of the globe,” the report states. With regards to the new era of fiscal austerity, the authors advise policy-makers to ensure that the supports they put in place drive sustained long-term growth. The researchers say this type of growth can be aided by ensuring that the bulk of the value provided by subsidies flows to ratepayers and taxpayers.

Stern words

The subsidies for clean energy will not have to be built for eternity, the report indicates. After all, in the future clean energy technologies will likely be competitive with dirtier forms of generation on a completely unsubsidized basis. The report doesn’t specify when this equilibrium will be reached and has some stern words for policy-makers: “Until then, the onus is squarely on policy-makers to devise programmes that are both effective and efficient.”

References and citing

Green Investing 2011: Reducing the Cost of Financing. Michael Liebreich, Ethan Zindler and Tyler Tringas at Bloomberg New Energy Finance and Anuradha Gurung and Max von Bismarck at the World Economic Forum. Earlier reports of this series:

This article may be reproduced according to our terms of use with attribution (and link, if online) to http://www.tias.edu. To be cited as: “Tailor-made subsidies needed until clean energy can compete”, Michael Liebreich, Ethan Zindler, Tyler Tringas, Anuradha Gurung and Max von Bismarck, www.tias.edu, November 10, 2011.

WEF_IV_GreenInvesting_Report_2011
Green Investing 2011