The house of cards that is Europe’s boom in renewable energy is rapidly collapsing as hard-pressed governments find they can no longer sustain the illusion that anything profitable is being accomplished.
 
From Germany to Spain to Italy to the U.K., governments are pulling back from commitments to subsidize wind and solar – and investors who have committed them are trembling.
 
Germany, whose subsidies have made it the world’s leading installer of solar panels, has declared modest reductions. (The Germans’ zeal is driven, in part, by their pathological dislike of nuclear energy.)  Spain, which tried to fashion itself into the world leader in renewables, has managed to damage its whole economy. Italy is in a budget whole and is cutting back on subsidies. Ironically, the only country that isn’t publicly disavowing its renewable program is Greece, which is in the worst shape of all.
 
The main culprit here is “feed-in tariffs,” a strategy that blessedly hasn’t made it across the Atlantic yet, although people are trying. To date the U.S. has relied on “renewable mandates,” which simply order utilities to build renewable installations and swallow the costs. Most state laws allow utilities to pass these increases through to their customers, though and ratepayers are starting to catch on.
 
In Europe, the government went ahead and shouldered the entire burden with a “feed-in tariff,” which has nothing to do with feeding or tariffs but is simply a price guarantee, with government committed to making up the difference between the market and guaranteed price. "The design of a feed-in tariff mechanism is innately uneconomic,” Jim Fitzgerald, an assistant director at Ernst & Young, told ClimateWire. “They are great for investors but very difficult for governments to sustain. The real lesson here for investors is that if something is too good to be true, then it probably is just that.” 
 
It’s a lesson that governments and renewables-at-any-price enthusiasts might learn as well.

Read more about it at the New York Times

Tags: Europe, feed-in-tariffs, Renewables

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