Chapter 4
Introduction | Discussion of Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | Chapter 12 | Conclusion | Appendix
Chapter 4: Financing the impossible. This chapter concentrates on the institutional support mechanisms legislated by government to encourage and obligate the generation of electricity from renewables. In the UK, this relates mostly to Renewable Obligation Certificates (ROCs). Etherington’s explanation of the complex arrangements is essentially correct and he rightly shows that the wind industry depends on these financial arrangements for its capital-intensive technology (i.e. per unit of generation, wind turbines are expensive to purchase, but once installed, the wind, the ‘fuel’, is free). In addition, offshore windfarms receive grants and accelerated support. He also summarises the support mechanisms used in other countries, including the feed-in tariff mechanism used in a majority of European countries. For all these mechanisms, he complains that the money given in support is raised as a levy on the unit costs of electricity paid by consumers. He sees this as ‘huge and concealed benefits to the wind power developers and covert arrangements which prevent this from being common knowledge’*. In fact, none of these support mechanisms are secret, with information freely available, especially on the Internet. I would agree with Etherington however, that all levies on consumer payments should be presented clearly on each bill. In practice, very few consumers bother to understand levies made by governments. Nevertheless, we should be pleased that the levies remain accountable for the specified functions and are not sequestered by governments within general taxation.
Etherington ignores the institutional support mechanisms given to other generation, including (i) the basic UK electricity supply infrastructure established by the pre 1989 nationalised industry, (ii) the government owned nuclear industry and the sale at low-cost of capital assets, (iii) acceptance by government for the costs of treatment and disposal of nuclear waste, (iv) considerable ‘legacy’ costs from the previously nationalised coal industry, (v) significant tax concessions to companies for oil and gas exploration, and for coal extraction. Thus governments have always assisted energy supply industries and continue to do so in their efforts to maintain energy security from diverse supplies. Today, governments have the added duties and obligations to reduce pollution from predominantly fossil fuel use, for which renewables and the efficient use of energy provide the greatest opportunities**. Nowhere in this book are such well established economic duties and policies mentioned, so the reader is left with the impression that wind energy is unusual, and therefore culpable, in having support mechanisms.
**The fundamental factor is that there are real external (social) costs from pollution that polluters should pay. However, fossil fuel suppliers are not charged with the bulk of these costs, so support to providers of clean energy has to be provided so the pollution is abated. Etherington makes no reference to any such aspects.