Some countries, states and provinces value clean renewable energy (RE) above other forms of energy. These countries, states and provinces pay energy producers a premium price for the RE power they produce and feed into the grid. The growing list includes: most European countries, China, Japan, Ontario, Nova Scotia, Prince Edward Island, California, Virginia, Washington, Vermont, much of Australia . . . to name just a few.
This special rate paid for renewable energy is called a “feed-in tariff.” It is designed to encourage people (homeowners, business owners, cooperatives, energy developers, etc.) to invest in RE development and feed clean power into the grid. It kick-starts the adoption and development of renewable energy. Once the industry is well established and therefore approaching competitiveness with the already heavily subsidized “conventional” energy industries, feed-in tariffs are reduced and eventually phased out, allowing market forces to take over.
Feed-in tariffs work extremely well. Home owners are encouraged to install solar panels on their roofs, developers are encouraged to invest in commercial-scale RE facilities, businesses are encouraged to supply the equipment, manpower and manufacturing capacity needed to meet the new demand, and lots of jobs are created.
But why should a country, state or province bother? Won’t paying RE producers more for their energy just drive up energy costs for everybody? Why not just let “market forces” take care of it?
Let me attempt a few answers.
Besides the very practical reasons mentioned above (attracting investment, job creation, etc.) there is significant and warranted global concern about climate change and pollution, concerns linked directly to our use of energy. By encouraging a shift to renewables, feed-in tariffs are one tool in our toolbox to help slow climate change and reduce pollution, both exceptionally worthy goals.
“Lower cost” seems to be contrary to common sense, because surely if the utility is paying more for RE power with a feed-in tariff, then it follows that it must be costing consumers more. Well, actually, no. That’s because every kilowatt of power I produce with my rooftop solar power system is a kilowatt of “new power” that BC Hydro does not have to create.
How much does it cost to create “new power” these days? BC’s proposed Site C dam, for instance, will cost provincial taxpayers roughly $20 million per megawatt to build. Not exactly cheap. Expect your power bill to increase dramatically to pay for any new power deemed necessary by your utility.
With a feed-in tariff, (which BC does not have) the need for this long-term provincial debt could be quickly eliminated. The world-class wind and solar resource of BC’s Peace Region would be immediately tapped by entrepreneurs waiting in the wings to do so. Even BC Hydro admits (agreeing with the rest of the world), that the cheapest power by far is the power that they do not have to produce in the first place. Feed-in tariffs quickly reduce the need for new power investment, keeping energy prices low.
Strangely, feed-in tariffs and the resulting widespread adoption of renewables DECREASES energy consumption. This has been noted recently in Ontario, where after several years of aggressive feed-in tariff policy, per-capita energy use has fallen. Spinning wind turbines on the horizon and subdivisions sparkling with solar panels might act as reminders of the fact that energy is actually “produced” – it doesn’t just magically flow out of the wall socket. Perhaps efficiency and common-sense energy conservation are a natural outcome of citizens becoming energy producers and not just consumers.
Renewables are everywhere. Sun shines, wind blows. Being locally produced, RE is locally consumed. Electrons flow to the nearest load, so my rooftop solar array powers my building first, then my neighbours’. The more renewable energy installed across the landscape, the less transmission infrastructure is needed, and the lower the transmission losses. Both result in lower costs, greater efficiency and a more robust grid.
The yes or no of feed-in tariffs boils down to politics and policy at the highest levels of government. Feed-in tariffs level the playing field for renewables, allowing them to gain a foothold. After that, may the best energy win.
I think we know which energy that will be.