How to Make Renewable Energy Economically Viable

It’s called ‘feed-in tariffs.’ From The Washington Monthly:

Why is the renewable energy market in Gainesville booming while it’s collapsing elsewhere in the country? The answer boils down to policy. In early February, the city became the first in the nation to adopt a “feed-in tariff”–a clunky and un-descriptive name for a bold incentive to foster renewable energy. Under this system, the local power company is required to buy renewable energy from independent producers, no matter how small, at rates slightly higher than the average cost of production. This means anyone with a cluster of solar cells on their roof can sell the power they produce at a profit. The costs of the program are passed on to ratepayers, who see a small rise in their electric bills (in Gainesville the annual increase is capped at 1 percent). While rate hikes are seldom popular, the community has rallied behind this policy, because unlike big power plant construction–the costs of which are also passed on to the public–everyone has the opportunity to profit, either by investing themselves or by tapping into the groundswell of economic activity the incentive creates.

It really does emphasize how debilitating monosopies (de facto monopolies) can be to technological progress. And Germany demonstrates how, once those monosopies are removed, successful feed-in tariffs can be:

The policy has allowed Germany not only to meet but to exceed its renewable energy goals. Initially, the aim was to get 12 percent of its electricity from renewable sources by 2010. But it passed that milestone three years early, and has since reached the 15 percent mark–the most rapid growth seen in any country. By mid-century, Germany aims to increase that share to 50 percent. Already, the nation, which is about as sunny as Juneau, Alaska, is home to almost half the world’s solar generating capacity, and churns out more solar power than any country except Japan. Although it is half the size of Texas, and far less windy, it is also vying with the United States for the number one spot when it comes to generating capacity for wind power….
What inspires ordinary Germans to invest in renewable energy? Part of the answer is that it’s about as safe as government bonds–and brings a better return. Under the German system, renewable energy producers are given long-term, fixed-rate contracts, designed to deliver a profit of 7 to 9 percent. This makes green energy a secure bet for both investors and banks.

Unfortunately, you know the Blue Dogs and the Republicans will try to stop this at the federal level every chance they get….

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6 Responses to How to Make Renewable Energy Economically Viable

  1. Jérôme ^ says:

    Why, isn’t this already the case all over the US? In France, EDF (Électricité de France) has been compelled to buy power from any producer at a fixed rate ever since it exists, and it seems quite normal.

  2. Tony P says:

    Sorry, I already pay far to much for electricity when distribution costs are factored in. Comes out to 16 cents a kWh.

  3. Huh? says:

    “Unfortunately, you know the Blue Dogs and the Republicans will try to stop this at the federal level every chance they get….”
    Hmm. By this reasoning feed-in tariffs ought to be easily passed in Big D states like Washington, Oregona, California, the Northeast, the Great Lakes area… We’re still waiting.

  4. Troublesome Frog says:

    Sorry, I already pay far to much for electricity when distribution costs are factored in. Comes out to 16 cents a kWh.

    What’s the “right” amount to pay for electricity?

  5. Kevin says:

    I agree with the need for policy changes to promote renewable energy. We also need a massive updating of the nations electrical infrastructure. The nature of the electric grid hasn’t changed significantly since the time of Thomas Edison. It is designed for transmission from a central point outward. Metering, monitoring, and safely controlling power flowing from multiple sources requires a well thought out set of national standards as well as the deployment of appropriate technology to support a redesigned grid.

  6. Treppenwitz says:

    You mean Monopsony, which is is not a “de-facto monopoly.” Monopoly describes a situation with one dominant producer. Monopsony describes a situation with one dominant consumer.
    Oddly enough, this sort of policy makes the power company both a monopoly and a monopsony in a sense. Since people can’t really buy and sell energy from each other directly, the power company is the only game in town whether you’re buying or selling electricity.

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