Renewable Energy – “It’s the poor what pays the price”

Everyone supports the idea of renewable energy as a major part of climate policy and as a major  plank in reducing greenhouse gas emissions. This support goes across the political spectrum with probably most dissent coming from the right rather than the left. To be clear I support the need for investment in renewables.

But renewable energy – at present – generally redistributes wealth from the poorer segments of society to the wealthier and yet there has been little focus on this. Why is an interesting question. The political challenge will be to find a way to avoid “carbon poverty” by providing support payments to poorer sectors of society while maintaining the environmental policy which drives the need for renewables.

The primary mechanism which underpins renewable investment given current economics is price support usually in the form of feed in tariffs. This is a political decision as these tariffs need to be approved politically given the regulation of electricity markets. Feed in tariffs are paid for by all consumers either as a flat rate charge or based on consumption. So governments legislate for consumers to finance investments in renewable energy. In the UK, the Labour government started this policy which has been continued under the Coalition government, so all three major political parties have supported and implemented this policy – there appears to be a political concensus that this is the right policy.

Who are the beneficiaries of this policy? Well renewable energy like any other resource requires the ownership of an “interest in land” to be able to exploit it. Whether this is a building or a plot of land doesn’t matter, it relies on having the ownership interest which permits the installation of the equipment for renewable energy. This applies whether it’s a solar panel or wind turbine, it’s more complicated with hydro installations where ownership of the interest in “land” can sometimes be murky. So if you don’t own an interest in land you can’t benefit from the support mechanisms which underpin investment in renewables.

Governments could have funded renewables in a less regressive way, they could have chosen taxation as the funding mechanism – but they didn’t . What is surprising is the lack of comment and debate about this choice.

There is another secondary impact of this on the farming sector. Farming ,of course, requires an interest in land and certainly in Europe farming receives financial support from the Common Agricultural Policy, some would say a considerable amount of support, the question I would pose is should we review the support for farming in the light of the support which farmers receive for renewable investment? Should they really receive both forms of support if a farmer invests in renewable energy? The FT ran an article at the end of last year about a north German farming community which earns more from renewables than farming – is this good policy when that community receives support for both activities?

No comments yet.

Leave a Reply