The Global Energy and Climate Policy course offers an introduction to the theoretical and practical understanding of how energy and climate change policies are designed, shaped, advocated and implemented. As energy markets go truly global, domestic energy policies are becoming more and more entangled with wider issues of international governance. Concurrently, the urgent need to mitigate and adapt to climate change and transition to a low-carbon future is adding a further layer of complexity. The course is aimed broadly at people interested in learning more about interconnected issues in energy and climate policy globally. It assumes a level of interest but no necessary previous knowledge. However, the course also offers sufficient up to date research and new critical perspectives to be of interest to people with expertise in or academic familiarity with the topic as well. The main aim of the course is to provide this wide-ranging introduction in a self-contained, but in-depth form, alongside the important practical skills necessary to understand and discuss energy and climate policy, and lay the groundwork for greater engagement in the future – either through academic study, in the public, private or not-for-profit sectors.
Focus on Feed in Tariffs
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En provenance du cours de University of London
Global Energy and Climate Policy
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Up-scaling renewable energy: policy incentives
This week discusses the growing role of renewable energy sources such as wind and solar. It introduces the range of fiscal and other policy tools that governments’ use to promote an increase in the production and consumption of renewable energy.
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Harald HeubaumDr
Centre for International Studies and Diplomacy (CISD)
How about feed-in tariffs?
Now in Europe, we've had feed-in tariffs for a while
and a number of countries to incentivize the uptake
of renewables and now there are those who say, we don't really need them anymore.
We don't need them at that level anymore they are at.
They can be phased out over time.
Perhaps, in other countries, you work in African context a lot,
they are more needed to develop and build build a system up from the ground.
What is your take on whether we still need feed-in tariffs
and to what extent we need them.
I think we're going to need them less and less.
And also governments are restructuring feed-in tariffs so
that there are competitive auctions or contracts for difference.
So it's costs it's costing the consumers and taxpayers a lot less.
But I do believe that renewables are becoming
more and more competitive without feed-in tariffs,
so they can compete on the market as long as there's a level playing field
and also having a level playing field means that there has to be a price for polluting.
You know if you and companies who are competing with fossil fuels need to either
have carbon sequestration or pay a very large fine for emitting carbon.
The key idea of feed-in tariffs was to make, they've been primarily used
for solar to make them more competitive to the existing electricity
which is largely coming from coal fired or gas fired power stations.
As the electricity produced from solar equals the levelized costs of energy
from those other sources then there really isn't a need to use feed-in tariffs.
I think personally that feed-in tariffs, one of the problems around feed-in tariffs
is they are complex to run to the governments around feed-in tariffs.
So if you're trying to introduce feed-in tariffs
and I think this is where we're looking at this in relationship
to the least developed countries particularly
is there may be an inappropriate regulatory device
because of the complexity of coordinating and running those.
Although, you know the other side of that could be the new technologies
and the use of digital technologies, mobile phones, etc.
could facilitate a different type of feed-in tariff,
a different way of designing feed-in tariffs
and that's localized and you have a micro-finance approach you know
that maybe is run by local district authorities rather
than having a national feed-in tariff,
so maybe it's more about rethinking feed-in tariffs.
Often regulatory tools have a sort of fad period.
They're in fashion and then suddenly it's like well that doesn't work anymore.
To find later on that you are using it again you are using it
but it's in a different format you know.
So you know again nearly all the time it comes down to context
and this a different way of perhaps looking at what's needed and in a different context.
Yeah and some of the very strong targets
for renewable energy have called forth the capacity from the supply chain.
And I think that that's that's something which we should expect to follow in the future.
Strong renewable supply components are at the forefront of the majority of the INDCs.
Renewable energy is the largest growth area that we see within the global energy economy.
These these trends are extremely positive.
But at the same time there's some underlying friction,
some of the benefits have not necessarily been visited upon local consumers
who end up paying very very high premiums relative to say wholesale electricity prices,
to support the transmission and distribution network,
to support some of the feed-in tariffs.
Retail energy prices are extremely high in key markets like like Germany
where there's perhaps been the greatest experiment
and it remains to be seen whether there's perhaps a crisis looming
where consumers essentially say,
"I'm not willing to pay that premium any anymore
whatever the relative merits of the power system that you've developed.
However green it may be it's not affordable.".
In Europe, we've been using for most you know Germany is great example,
Britain's not a great example, Spain is a good example using feed-in tariffs.
And that that's an incentive based to to encourage producers
with solar for domestic and utilities and to sell to the grade.
And they would get a premium for doing so.
And then this could be an obligation on the the grid to buy that electricity
and they would get this premium over a period of time,
it may be that the escalation as it did in Germany,
so as the price goes down in terms of production,
they're not always getting this premium at a certain level.
So these incentive mechanisms,
they're very useful at the start but as the price goes down which has happened
with solar, maybe don't need them.
So you need to target the renewable energy that's coming up.
Further you need to have a focus on encouraging new technologies
or improved technologies.
In certain certain instances the breakeven points
we're talking about the most optimal conditions you know when when we suggest
that renewables have reached parity
with thermal generation there's a lot of hidden costs which tend to be put to one side.
We're very rarely talking about transmission and distribution charges,
when we're talking about the levelized cost of electricity,
and there's it's very you know it's it's creative accounting
and it's important because the improvement does need to does need to be shown
and I think in many ways has been a transformative aspect of the energy economy the way
in which solar costs in particular have fallen over the course
of the last five to 10 years.
It's one of the more remarkable stories perhaps alongside
unconventional upstream production that the that the global energy economy has seen.
Now in the less ideal type then those technologies will continue to warrant a degree
of support and I think that's one of the things
that's quite you know a subtle inflection point is that
the what was hitherto a peripheral concern,
renewables has basically become the main stream in the core of the power sector
in the majority of countries, certainly, that's been the European experience.
Many North American markets would echo this and I think
that you know trends will continue to spread and in other parts of the world.
And with that big very very large integrated energy companies have moved into that space.
So wow.
You know the small residential consumer that put up a solar panel on the basis
of a particular promised return is chagrinned the pace
with which policies have been rolled back and degrees of support have been withdrawn.
The large energy companies are sufficiently diversified to take the opportunity
that goes along with tariffs in certain jurisdictions,
can weather the storm when they're reduced in others.
And you know renewables have become such a core part of the business
that that's the that's the in a way the challenge is creating that balance in
and around a technology that still is mandated on the basis of its climate dividends.
That's you know we're at as since although it's a core concern in the mainstream
that's because it's zero carbon that's because of the way
that it contributes to climate change.
And in that space, there's always going to be inherent volatility
because it's the vagaries of politics that decide the scope
for this technology in the market
and that you know that that creates a huge amount of risk for for would be investors.
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