The Unequivocal Superiority of the Feed-in Tariffs for Renewable Power?

Michael Giberson

At the IEEE Spectrum’s EnergyWise blog, Bill Sweet discusses one implication of current low power prices: even with generous subsidies, a potential wind or solar power plant project may not be profitable if power prices are expected to stay low.

Sweet seems to believe this is a problem that requires a solution.  In a parenthetical remark, he says:

(Note in this connection, however, the unequivocal superiority of the “feed-in” tariffs that countries like Germany and Spain have adopted to encourage investment in wind and solar. In those countries, investors are guaranteed prices for electricity generated by renewables over time, regardless of what happens to general electricity rates.)

If the goal of public policy is to encourage continued building of wind and solar power plants with no regard for whether anyone really needs or wants to pay for the output of those plants, then a feed-in tariff is just the thing.  (For background, see Wikipedia on feed-in tariff).

On the other hand, and maybe this is just the economist in me coming out, it seems rather sensible to have policies that provide larger inducements to build new power plants when more power plants are needed and smaller inducements to build new power plants when we already seem to have plenty of power plants available.