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The Problem With Feed-in Tariffs

The Guardian Leader praises feed-in tariffs today:

Get past the behemoth of a moniker and the idea is simple: those generating electricity from renewable sources are paid generously for extra power they feed to the grid. Electricity companies have to buy this energy and share the higher cost among all their customers. It is supposed to kick-start investment in greener energy, and it works: Germany\’s adoption of the programme has helped it develop 200 times the solar power capacity of Britain and 10 times the wind energy, despite Britain being a much windier place.

As far as it goes, this is fine. If we do in fact want to encourage the installation of the current generation (sorry) of technology, then such tariffs are indeed a good way of subsidising said installation.

However, we don\’t really want to encourage said installation. The current generation is markedly inefficient. We also know that the next, or the next but one (say, solar in 5-10 years as an example) will be markedly more efficient. If we are to believe the likes of Jeremy Leggett then solar will be competitive with coal in under a decade. That\’s when we want to start installing, not now.  The falls in price which will lead to this desirable state of affairs are of course being driven in part by subsidy expanding the market and bringing economies of scale into play. Fortunately for us, Hans and Fritz are paying those subsidies. We can simply wait and then take advantage of the technology their payments create.

Of course, when solar is so price competitive, then we won\’t need subsidies at all. Far better to wait, to not shell out on the subsidies, to use that money elsewhere, and to adopt an economically rational technology as and when it appears in the near future.

In the UK, both the Conservatives and the Liberal Democrats favour the introduction of a similar scheme, but the government prefers to tinker with its Renewables Obligations. These are far dearer and much less effective, mainly helping big energy companies dabble in the easiest, cheapest renewable energy sources.

Quite: we want people to be dabbling in the easiest and cheapest technologies. Indeed, what we really want is people to experiment, to find which are the cheapest and easiest technologies. After all (unless you\’re motivated by guilt) there\’s no reason to do something expensive, just because it is expensive.

The calls for feed-in tariffs, the calls for more subsidy now, are making the mistake of assuming that technology is constant. It isn\’t, it never has been and renewables technology now is going through a great burst of innovation (you could argue that it\’s of a similar intensity to that which greeted electricity itself, or the beginnings of the oil age). What we need is not installation of the current generation but the sorting process to find which of the new technologies actually work, the cheapest and easiest of them.



6 thoughts on “The Problem With Feed-in Tariffs”

  1. These feed-in tariffs may even delay the implementation of new technologies by generators retaining old technology to keep subsidies high or by the high cost of replacement.

  2. “After all (unless you’re motivated by guilt) there’s no reason to do something expensive, just because it is expensive.”

    Except, according to your post “Services should not be free at the point of use”, we’d apparently value it more.

    Tim adds: Heh: possibly true.

  3. Clean, reliable nuclear power costs 5 cents/kwh delivered.
    Unreliable wind power costs twenty times more.
    Amazing that anyone can hate families enough to make them pay twenty times more for something as basic as electricity.
    Even more amazing are the lies they tell to justify it. is always pointing out that we should pray for these gougers, since there’s no other way their souls can avoid eternal pain.

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