Effective Economic Support for Energy
From the previous posts, I focused on the importance of renewable energy, and the economic relationship with renewable energy and the world. Now, I’m going to briefly talk about a topic,
How do we effectively produce renewable energy?
Al Saqib Majumder, who was is the publisher of Medium wrote a post about the affordable and clean energy goal of the United Nations. He described endeavors and struggles for renewable energy by focusing on the effective production of energy. He suggested few ways for the effective production of energy such as reduce consumption taxes. One thing I’d like to focus on is subsidies, the government’s economic support for renewable energy. In the post, he said,
“The government can also subsidize companies like Tesla and Vestas who are willing to provide ways to ensure access to energy in places where electricity has not reached yet.” (2017)
Just like the previous post that I wrote, in order to activate the development of renewable energy, there must be economic support from the government, and Majumder said so. Indeed, there is evidence of the effectiveness of this way. There is a post on Medium from the World Economic Forum, talking about the Chinese renewable energy subsidies. According to the post, China built the wind and solar power station using the subsidies, and since that, by 2017, China generated 5.3% of the electricity supply using renewables. Currently, China has become a leader in wind and solar power capacity. The World Economic Forum said, “The success of China’s renewable energy drive fully illustrates the effectiveness of China’s on-grid tariff subsidies. The advantage of the on-grid tariff policy — through which the government can make renewable energy production more competitive and attractive to businesses and investors — is that it anchors the revenue of power generation throughout the entire life cycle. In this way, it conveys a clear price signal to investors, and can effectively support the early stages of renewable energy development.”(2018) This illustrates that the economic support from investors made China able to develop and become a leader in renewable energy.
However, ironically, the World Economic Forum also states that too many subsidies may incur a deficit. He said, “The subsidies for renewable energy should be compensated by the renewable surcharge collected from end consumers. China’s renewable surcharge was 0.015 yuan/kWh in 2012 and rose to 0.019 yuan/kWh in 2016. There was a surplus of 15 billion yuan in the account of China’s ‘renewable energy subsidy’ in 2012, but by 2017 it had turned into a large deficit of about 80 billion yuan.” (2018). After the rapid increase of the capacity of renewable energy, the renewable subsides has been also increased rapidly. The PV(photovoltaic)subsides was 60 billion yuan at 2012, but increased to 170billion on 2017.
However, as the writer said above, subsidies definitely need rewards for that, but the truth is that the end consumer is too low to fulfill that huge amount of subsidies. The World Economic Forum states, “Despite the government’s efforts, the relatively large curtailment is likely to continue, as long as renewable installed capacity continues to grow rapidly. As such, the government might need to consider reducing subsidies to contain the enthusiasm for renewables……Reducing subsidies can also force renewables manufacturers and power plant investors to consider future investments more carefully, and encourage them to look for more economical projects.”
Of course, it is true that technological innovation needs sufficient financial support. But it must be flexible with the reflection of reality. Since that, the renewable energy industry in China is growing rapidly, the government subsidy policy must be flexible for much more effective innovation of renewable energy.
References
Al Saqib Majumder, April 27, 2017, Affordable and Clean Energy: Both an aspiring endeavor and a difficult struggle, Medium, Affordable and Clean Energy: Both an aspiring endeavor and a difficult struggle | by Al Saqib Majumder | Medium
World Economic Forum, May 24, 2018, How renewable energy subsidies are taking the wind out of China’s sails, Medium, How renewable energy subsidies are taking the wind out of China’s sails | by World Economic Forum | World Economic Forum | Medium
