"In Business"

[martin]

Caught the following programme last night -  http://www.bbc.co.uk/radio4/news/inbusiness/inbusiness.shtml- interesting account of the German solar initiative, and most tellingly, towards the end, the presenter has a pretty hearty "go" at that blithering idiot Wickes - and in words of one syllable clearly says that there is a powerful cadre at work within government to stifle renewables in favour of nuclear........................

[wookey]

ah, welcome back martin - glad to see you are still alive :-)

yeah. I caught the 2nd half of that prog (twice in fact). Very interesting. Now I need to listen again to hear the furst half and find out what the German support mechanism actually is.

In fact it was the founder of Solar Century (described as 'largest solar company in UK' - is that right?) who accused Civil servants of preventing renewables in favour of Nuclear (not the presenter).

[Bargeman]

Welcome back Martin,

Very much agree. The issue covered in the programme seemed to be the greater success that most other countries in Europe have had using feed-in tarriffs to promote renewable technologies versus the UK's preferred alternative of setting a single ROC price. To understand why the germans et al have been able to achieve greater market penetration at a lower cost it would help to have done 'A' level economics.

The feed-in tarriff favoured by the Europeans allows the price for each renewable technology to be set at an appropriate level which reflects its cost base. Whereas the UK ROCs by setting a single price for renewable energy enable lower cost producers (e.g. large scale onshore wind) to reap 'economic rent'. This means that for some technologies ROCs offer a greater subsidy to lower cost technologies than is necessary to bring that technology to market, i.e. the system is more expensive to the taxpayer than it need be. By matching subsidy to cost of technology a feed-in tarriff reduces economic rent reaped by low cost generators and hence the cost to the consumer.

Hence we find the UK moving to a two tier system for ROCs to allow higher cost technologies  (e.g. offshore wind) to be sufficiently subsidised at a higher rate. A ROC system with multiple prices depending on the cost base for different technologies is effectively turning into a feed-in tarriff. An admission by government that the system they have promoted does not achieve the results it is looking for and that the continental approach is more effective.

Feed-in tarriffs are better at matching the subsidy to the level of cost required to bring a specific technology to market. The UK authorities find it difficult to stomach the fact that the 'market based' ROC approach they have promoted is more expensive in terms of subsidy than the continental feed-in tarriff approach. The programme was very good but I feel it didn't quite get to grips with the economics that underpin the different approaches adopted by the UK and other European economies.

regards