Question

Renewable energy subsidies: Case of Spairn "Germany's near miracle may be remembered as the environmental equivalent of, say heart-transplant surgery: a worthy endeavor, undoubtedly, but one that remains unattainable for all but the very wealthiest" (Text 1). Does the failure of the Spanish experience confirm what the author thinks about the renewable shift strategy: It's so costly that only rich countries could afford it? Discuss this idea by comparing the Spanish and German experience? And give some advice o 194 how the subsidies policy should be implemented. Your answer should be in the form of an essay. Do not write more than the space given)

Answer 1

For past many years, Germany has been spending billions of Euros on promotion of renewable energy projects in the country. The subsidies to promote green energy sector by German government was amounted to 2.3 billion Euros in January 2017 that was .25 billion higher than the amount spent in December 2016. The subsidies to energy operators were provided under German Renewable Energy Sources Act that was enacted by then German Chancellor Gerhard Schroeder. The broad aim of German government's energy subsidy program Energiewende was to transform the economy into renewable energy economy using solar and wind energy sources. The energy subsidy bill of government continue to rise further due to rising cost of renewable energy projects. It is estimated that Germany is likely to fall short of emission reduction target of European Union (EU) till 2020. Though renewable energy sector in Germany contributed around 36% of total electricity consumption in the economy but failed to make significant inroads into the transport sector. Fossils fuels still is being used in large quantity in transport and communication sector. The annual report of EU revealed that Germany's ambitious renewable energy program is at brink of collapse but also pointed out that Germany's energy program is expected to fulfill around 20% of renewable energy target of EU. The new energy policy is likely to fall short of green house energy emission target of EU by 40% in 2020. The Germany's failure to meet its EU emission reduction target may result heavy penalty by EU Commission.

Spain is another EU country that spent huge money in development of renewable energy sector in the country. But the renewable energy program of Spain is also on verge of collapse at present. Jose Maria Gonzal Moya of Spanish renewable energy association pointed out that Spain once a pioneer of renewable energy sources is now struggling hard to sustain its renewable energy program due to rising input costs. Spanish renewable energy association recently challenged government's decision to revise the electricity rates for solar and wind power plants. It is estimated that proposed electricitty rate revision will reduce the annual revenue of renewable energy operators by 600 millions in next three years.

The failure of the green energy program in both Germany and Spain is attributed due to rising cost of green energy. The green electricity price in Spain is expected to rise by 25% as per the estimate of Ministry of Energy Tourism and Digital Agenda of Spanish government. Such forecasting is discouraging the solar and wind energy companies who is already experiencing fall in their annual revenue. Same is the case with cost of green electricity in Germany. Many households in the country now feel that the electricity rates of solar and wind plants is higher than electricity rates of nuclear and thermal plants. The electricity rates is almost double in 2017 to electricity rates in 2000. Many consumers says that they support the government's renewable energy project but the energy transformation is not actually benefiting them. The regulatory policies of both Germany and Spain failed to boost the investment in renewable energy sector and energy firms only focused on maximizing their revenues and misused the government subsidies. Still in both countries, fossil fuel consumption in various sectors especially transport is still highest. This also dampened the EU's broad objective of reducing the greenhouse gas emission in the member countries.

The rising cost of energy transformation, installation of solar and wind power plants are no doubt increasing the monthly electricity bills of the consumers and therefore, the expensive renewable energy projects are not financially feasible for poor and developing countries. The cost of transforming the economy from fossil fuel and nuclear energy to renewable energy need large financial support of the government that can be provided only by rich countries like Germany, Spain, UK etc Therefore, one way to implement an efficient energy subsidy policy is to formulate specific subsidy plans for investors who only fulfill the specific targets of government. Government should also focus on cost effective technologies that cuts down the cost of electricity and transportation of solar and wind projects. Government should also periodically review its subsidies policy analyzing cost, time and emission reduction factors.