Thursday, March 8

Is wind energy subsidised?

If you are thinking that government is directly funding wind turbines with tax payers money, then the answer is a big NO!

If you mean that there are incentives to cut carbon emissions then the answer is YES.


The primary mechanism to help cut carbon emissions in the electricity generation industry is called the Renewables Obligations system and Renewable Obligation Certificates (ROCs). This system works to shift money from companies that produce high carbon energy to those that produce low carbon energy. The government purely sets obligations levels each year for renewable energy and companies get Renewable Obligation Certificates for each 1MWh of electricity produced from renewables. Every company must produce a certain percentage of renewable energy each year (the obligation) and that amount is increased from year to year, so that the pressure is on to reduce emissions. Companies that produce more than what their obligation requires, can sell excess ROCs that they are allocated to energy companies that haven't done enough. If an energy company has not met it's obligation and can also not buy enough ROCs, then it has to pay some money into a fund. This money is then redistributed to companies that were successful in meeting their obligations.

So the basic outcome of this scheme is that 'greener' energy companies get paid money by the 'browner' energy companies and the admin costs to run the scheme come out of the fund described previously. The net result is that the government only set targets and do not subsidise the system.

If you analyse the RO system, you would realise that there is only money in the system if companies fail to meet their obligation. If they all installed enough capacity each year, the market for selling ROCs would fall.

Of course it may mean higher energy costs in order to produce lower carbon energy. But then economies of scale are reducing costs and for many years high carbon energy has been subsidising our lives.

OFGEM info about Renewable Obligation Certificates


The second mechanism is the Climate Change Levy.
This is a 'carbon' tax aimed at businesses and large organisations, it doesn't apply to domestic energy users or charities. The tax applies to the use of high carbon energy and companies/organisations can apply for reductions in  the tax if they use electricity generated from a low carbon energy source, or they install measures that reduce their carbon footprint.
The tax is collected and becomes a part of the total UK government tax income, it isn't spent on wind turbines although the government could use it to help a company develop a new wind turbine in the same way as it could be used to help Nissan develop a new car!
One could only imagine it as being a subsidy if you didn't think CO2 emissions needed to be reduced and the bulk of todays climate changes wasn't caused by them. Many companies actually prefer reducing their Climate Change Levy burden by introducing energy saving measures rather than signing up for a green energy tariff, so it is difficult to see how the greener energy companies would benefit.

Climate Change Levy (DECC)

All in all, there are a tremendous number of lies told about wind energy in order to discredit it. Hardly surprising given the vested interests in the older and established energy technologies.

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