Monday, January 14, 2008

More on alternative energy development tools

This isn't really about emissions trading, but is a description and advocation of Feed In Tariffs as a means of regulating electricity generation to encourage cleaner sources. The idea, as implemented in Germany and advocated elsewhere is that any alternative energy producer is guaranteed a certain rate of pay and guaranteed that all the power they generate will be purchased by the electric distributors. This works to lower the barrier to entry by reducing the need to compete on cost effectiveness in favor of producing electricity in a non-polluting fashion.

It seems like an interesting idea, though I'm having problems with the idea of tinkering with markets to what seems like such an extreme measure. Effectively reducing the need to be competitive since no matter the cost to build the generating facility, a fixed price will be paid for the electric generated. Though, given the amount of subsidies, tax breaks, etc. given to the various energy industries in the US, I suppose that it isn't fair to argue that the electricity market isn't already very tinkered with.

Essentially, this sort of system becomes a clean development mechanism for non-polluting energy sources since the economics of making a profit and competing with established facilities is eased. With the guarantee that all power must be purchased, it also can serve the function to force the shutdown of traditional fossil fuel plants that are no longer needed as more clean plants come online and take over providing a portion of the load. So while it isn't set out as an emissions reduction scheme, it can have that benefit as long as it remains in effect.

Read more about it at Celsias.