Public Enemy Number One: Fossil Fuel Subsidies


February 7, 2013

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Something that’s often brought home at the major industry events is the huge amount of pressure that the wind sector finds itself under.

In many respects it sometimes feels miraculous that projects still get built at all.

This week’s EWEA conference in Vienna, whilst showcasing many of the great developments currently taking place, also highlighted the ongoing war of attrition that is required to secure consent, attract the right investment, and construct projects.

The speakers in the opening address all spoke of the challenge that the industry faces, but perhaps none more so than Fatih Birol, the International Energy Agency’s Chief Economist.

Mr Birol, it should be noted, does not have a partisan interest. He is not a developer, a green politician, an industry big-wig, or a financier. He is though, a master of the dismal science – pure and simple economics.

So when he spoke of fossil fuel subsidies as ‘public enemy number one’ – possibly the quote of the conference – people sat up and took note.

It was a salient point that Mr Birol backed up with some striking figures. Worldwide, subsidies for fossil fuels rose by 30% last year, yet oil still resides at a price of $116 per barrel – out of reach to many of the world’s poorest.

The floor price for trading carbon has fallen to a record low $10 – hardly an incentive for investment – and to put things into clear focus, fossil fuel subsidies now weigh-in at $523billion, compared to $88billion for renewables, of which wind accounts for $21billion.

Essentially, this means in many instances that firms are actually incentivised to produce CO2 at a rate of $110 per tonne.

Yet despite this, free market think tank, the Adam Smith Institute, in conjunction with US organisation, the Reason Foundation, rushed out a report that claimed Governments are over-investing in wind power.

The report claims wind power can, at best, provide no more than 10% of renewable energy needs – a figure bested by the UK in December 2011 when wind power provided 12.2% of electricity to the national grid.

It’s a tedious battle for the industry to have to rebuff shaky, non-peer reviewed ‘research’ on such a regular basis. And frankly there are more interesting debates that the wind sector could be addressing.

The wind industry will prove its critics wrong, of course. And the conference did provide a forum for many to highlight that costs are falling, even in offshore, and that the twin challenges of storage and distribution can be addressed.

However, in the short term, ill-judged reports like this simply place an added communications burden on a delicately balanced sector.

To combat this, firms of all shapes and sizes must ensure they are clear and consistent when extolling the value of wind energy, particularly when working with those outside the sector. Moreover, it’s yet another reminder that despite the great strides made in the last decade, as an industry we simply can’t afford to stand still.

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