When and How to Support Renewables?—Letting the Data Speak - Green Energy and Efficiency: An Economic Perspective - page 288

Table 1 Rationale for public renewable energy technology support
Event Rationale for public renewable energy support (RES)

WWI 1914 - 1918 and
WWII 1939 - 1945

Military use of renewable energy technologies

Oil crises 1972 and
1979

Reduction of energy dependence, shield economies from oil price shocks

Club of Rome report
1972

Prepare for the nite nature of energy resources

1996 Kyoto Conference RES as a means to mitigate carbon emissions from energy production

Since around 2000 RES support as infant industry policy

2008 crisis RES deployment as demand-side macroeconomic policy

1986 Chernobyl, 2011
Fukushima

RES as a means to replace nuclear reactors

Side benet RES to reduce pollution (NOx, SOx, VOCs, … ) from fossil plants

1.2 How to Support Renewables?

Already in the past, renewable energy technologies such as hydropower and geo-
thermal energy have been widely used where they were competitive with other
energy sources. Close-to-competitive technologies such as small hydropower plants
were introduced in the market by preferential regulatory schemes and by pricing the
externalities of fossil sources, e.g. through taxes and environmental regulations.
However, competitive and close-to-competitive sources are in most countries
unable to replace conventional plants in the volumes necessary to ful l the above-

outlined purposes. Consequently, renewable energy technologies that are not (yet)
competitive with conventional sources are required.
There are essentially three complementary strategies to replace fossil sources by
renewable energy technologies that are currently not competitive. The rst one is to

substantially subsidise the current renewables until they are competitive. The sec-
ond one is to make all undesired technologies uncompetitive either by taxation or
regulation. And the third approach is to support innovation in renewable energy
technologies in order to reduce their cost in the future.
Full-scale replacement of conventional sources by currently available renewable
technologies (stimulated by subsidies and/or making conventional sources less com-
petitive) would be prohibitively expensive. 5 Consequently, innovation is essential.

5 Thereby, the cost not only refers to the cost of the renewable energy technologies, but those of
the entire system. For example, to achieve 100 % of electricity generation from solar and wind
technology substantial investments into storage, networks and demand response are necessary. To
give one excessive example, a 10,000 MW solar installation in Germany ( 10 % capacity factor)

*

costing about 10 20 bn Euro together with a 10,000 MW compressed air storage costing about

10 bn Euro would be able to exibly deliver electricity the same way as a 1,000 MW coal plant
worth about 2 bn Euro. To illustrate the magnitude of this effect, an economy wide shift from the
current system to the outlined solar+storage system would increase electricity generation cost from
less than 1 % of GDP to about 10 %.

-