Environmental Engineering Reference
In-Depth Information
Renewable energy gets going -
in FITs and starts
There are two common ways of subsidizing renewable electricity. One is to give
renewable electricity producers guaranteed prices in feed-in tariffs (FITs), and
the other to impose on distribution companies an obligation to buy a certain
quota of renewable power, in conjunction with tradeable green certificates.
Both schemes act as a subsidy, the cost of which ends up on the energy bill of
the consumer.
FITs have proved more effective in raising renewable electricity production (for
example in Germany, Spain, Denmark) than quota obligations (which the UK
has mainly relied on). So about two-thirds of the European Union's 27 states
now rely on FITs. The UK still operates a Renewable Obligation Certificate (ROC)
scheme requiring energy companies to get a rising share (9.7% in 2010) of
their total supply from renewable sources. But the UK introduced a FIT in 2010
for small producers of renewable energy. In the US no federal subsidy scheme
exists for renewables (except for bio-fuels), but some thirty states have a quota
obligation, usually referred to as Renewable Portfolio Standards, and a few US
states are moving to FITs.
FITs are increasingly popular because they give producers greater financial
certainty, and can be set at different levels for different technologies. Germany,
for instance, has become a world leader in solar technology by setting a high
FIT for solar PV - a feat for which it has been praised in technical circles, but
criticized in financial terms. A FIT gives renewable producers a fixed guaranteed
price for however much power they feed in to the grid; some countries operate
a modified FIT system that gives producers a fixed premium payment to top up
the electricity market price. Quota obligations provide less financial certainty.
Renewable energy producers sell their green power for whatever they can get
in the electricity market, and they also sell accompanying green certificates
(ROCs in the UK case) to suppliers who need the certificates to show they have
fulfilled their quota obligation. In this system, renewable producers' income
depends on two fluctuating values, the market price of green certificates and
the market price of electricity. A further problem would come if ever the quota
were exceeded, causing over-supply of green certificates and a drop in their
value.
One solution is demand-management, or load-shedding. This involves
companies and/or individuals agreeing to take power cuts in return for a
payment or discount and is discussed in tandem with smart grids in the
previous chapter (see p.106). But there are plenty of other options.
