Sunday, September 25, 2011

How can governments promote renewables?

This article brought up questions that I tried to understand more fully with information gathered from other articles. From what I could gather from a quick bit of research, Germany has had in place for more than a decade an economic system of “feed-in tariffs” which over time help to subsidize the costs of implementing new renewable energy production over time. The feed in tariffs are contracts made with energy utilities that guarantee a fixed rate of compensation to start-up renewable energy companies over a 15-25 year time period. These feed-in tariffs are made possible with loans from the state run bank and paid for by the consumer with a small hike to their energy bill. What I found most interesting about these articles was the conclusions that could be drawn from the statistics presented. While Germany has a renewable energy sector that has grown to produce over 20% of total energy consumption in Germany, the U.S. has only 8% of its energy needs fulfilled by renewable sources. Another interesting point was that a poll taken in 2008 stated that Germans were even more reluctant to pay more for renewable energy than U.S. Citizens, 50% and 40% respectively were unwilling to pay more. It is interesting that now 79% of Germans polled that they were willing to pay the increased prices. This question was posed to the class. My other question was, what is keeping the U.S. from taking measures to implement similar policies, thus subsidizing the startup costs of renewable energies and, in the long run, making our national energy production cleaner and cheaper? Is there something special about the German system that makes this type of policy more easily implemented? The conclusive statement made here, “until people are forced to do so, or the price for renewable energy comes down considerably, people will not make the choice to go with renewables” resonated with me on this topic. This is a prime example of what we have been learning so far in class, mainly that the market dictates consumer spending and consumers are also vulnerable to the hidden nature of externalities in market cost. In this case we see that even though the German consumers were originally unwilling to accept the burden of increased costs, they had no choice: the government decided that it was best to subsidize renewable energies because of hidden costs involved in continuing use of, what has become increasingly apparent as of late, potentially dangerous nuclear power generation.

--Sean Doherty

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