Policy has a profound, positive and lasting effect on driving
investment and growth in renewable energy technology and deployment.
Regulatory policy that creates financial incentives to invest in
renewable energy technologies, or that establishes national and state
renewable energy targets and standards, has a direct and proportional
impact on the amount of investment in renewable energy by both public
and private investors.
The Power of Policy
Policy has the power to not only create and shape the
renewable energy market, but to sustain it as well. Examples from
around the country, and around the world, demonstrate that effective
energy policies effectively drive investment in energy technologies. In
other words, policy that incentivizes investment in turn incentivizes
growth. Statistics show that investment is directly proportional to the
scale of incentive provided by a renewable energy policy. In the U.S.
for example, the wind industry saw heavy investment and accelerated
growth during years in which the wind Production Tax Credits (PTC) were
in place. During years in which the PTC lapsed, however, the industry
saw substantially lower investment and slowed growth. Incentivized
policy drives the value proposition for investors, essentially
establishing a "go, no-go" scenario.
With the wind energy Production Tax Credit set to expire
at the end of this year, we are already seeing manufacturers and
suppliers preparing for a dramatic drop in domestic orders, and for the
subsequent reductions that will ripple through the workforce and the
national economy.
Creating an Effective Energy Policy
An effective energy policy must provide a stable,
long-term commitment focused on specific and measurable outcomes, and
provide manufacturers and developers with incentives that attract and
sustain investment in renewable energy, such as tax credits, monetary
grants, feed-in tariffs, or guaranteed loan programs. Policy should
also include achievable long-term targets, with meaningful interim
targets that reward performance, as well as clear financial consequences
for non-compliance that drive development and deployment of clean
energy technologies. Policy also needs to factor in cost containment
measures, favorable payback periods, and be tied to related enabling
policies that facilitate deployment.
Consistent Policy Created the European Wind Industry
In Germany, Denmark and Spain, renewable energy
penetration as a percent of total power generation has surpassed that of
the US through implementation of a series of clearly defined,
consistent, long-term energy policies that established targets and
incentivized investment in renewable energy development. In fact,
consistent renewable energy policies across the European Union created
the successful wind energy industry in Europe as we know it today.
In 2001, the European Union Renewables Directive 1
established targets for all EU nations to generate at least 20 percent
of electricity from renewable sources by 2010. In 2008, EU Renewables
Directive 2 increased the targets for renewable electricity to 33 to 40
percent by 2020.
But as early as 1991, Germany was already incentivizing
investment, development and deployment of renewable energy technology
ahead of the EU targets by implementing feed-in tariffs for excess wind
energy generation. Denmark followed closely with its own
feed-in-tariffs in 1993, and Spain joined the club in 1995. In a span
of just two decades, Germany has the installed capacity to produce more
than 60 GW of power from renewable energy sources, ranking third in
installed renewable capacity worldwide. In 2011, Germany also ranked
third in investment of clean energy technologies worldwide. The rate of
policy-driven investment in renewable energy technology impacts the
rate of growth in that technology—in direct proportion.
Success in the US
Federal and state policymakers in the U.S. can learn from
the EU's successful commitment to drive and sustain long-term investment
in renewable energy through the power of policy. In the past few
years, the number of states with Renewable Portfolio Standards has
increased by more than 50 percent, with a cumulative target of
generating about 50 gigawatts of wind-driven electricity by 2025.
However, short-term and fragmented federal policies have not provided
the integrated regulatory structure required to incentivize consistent,
sustainable investment and growth in clean energy technologies.
Incentivize to Invest, Invest to Endure
Investment in renewable energy technology has proven to be
dependent upon, and directly proportional to, incentives established by
the power of policy. The United States has the potential to become the
world leader in renewable energy generation—and to achieve the
accompanying gains in energy security and economic growth—by
establishing policies that encourage and sustain investment in an
enduring and efficient energy infrastructure.
http://www.renewableenergyworld.com/rea/news/article/2012/09/renewing-investment-in-rene wabl es-the-power-of-policy
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