Subsidies are financial incentives, usually paid by governments to encourage the production of something. There are many reasons that a particular product might be beneficial to the community, but not economically feasible to individuals and businesses. Many products are subsidized to support local businesses, reduce the amount of imported goods, provide employment and encourage environmentally friendly practices. The energy industries (coal, oil, nuclear, alternative) have always worked in an environment where subsidies have been used. In recent years the trend is to encourage renewable energy sources (such as solar, wind, biomass) at the expense of fossil fuels such as coal and oil. Feed-in tariffs and financial and tax incentives for photovoltaics are examples of alternative energy subsidies.
Each country’s goals may be different, so naturally they use subsidies differently to move toward their objectives. One common goal is to encourage people to use a fuel source that can be produced locally, thus promoting employment in their own country and reducing dependence on fuel from foreign countries. They may use subsidies on production rather than consumption of a locally produced fuel in order to increase the export of that product.
Governments may also see subsidies as producing economic benefits for their people, maintaining employment, reducing prices etc. International agreements, such as the Kyoto Protocol on reducing carbon emissions, can also lead to tariffs which discourage certain forms of energy, and encourage others.
Those who oppose subsidies will often use arguments that they distort the free operation of the marketplace, they do not necessarily benefit the people (e. G. The poor in underdeveloped countries) they were supposed to help, and, in the case of energy subsidies, they encourage increased consumption and waste.
Policies for promoting the production and use of renewable forms of energy are common to many nations. A major driver is the need to meet international obligations such as those agreed by the Kyoto Protocol on reducing carbon emissions.
Many fuels that we use now because they’re less expensive than their cleaner counterparts release carbon dioxide into the air. The carbon dioxide contributes to a natural effect in the earth’s atmosphere, called the green house effect, causing the earth to warm. A main aim of policy in many countries, is to reduce the use of fossil fuels, and to encourage sustainable and renewable energy, using alternative, carbon-neutral sources, such as biomass fuels, solar power, wind power, tidal power, hydro-electricity and (more controversially) nuclear power. You can see the effect of subsidies on the prices of solar panels for sale in the U.S.
Alternative energy subsidies support those policies. Feed-in tariffs and tax incentives for photovoltaics make it financially attractive for consumers to buy and use environmentally friendly solar panels. The goal of these subsidies and incentives is to help reach grid parity, which is the point at which the cost of renewable power is equal to the cost of traditional forms of energy.
When a government pays the producer of renewable energy for each unit of power the produce, that’s called a feed-in tariff. National electricity grids are conventionally considered as a network of suppliers (power stations) connected to a network of consumers (homes and businesses), but it is in fact technically possible for any consumer to feed power back in to the grid.
When solar panels are purchased and used by a private individual or business, they may generate more electricity than the home or business need, especially at certain times of the day or year. Feed-in tariffs allow the owner to feed that electricity back into the grid. The electricity company is obliged to buy that power, sometimes at a rate which is quite favorable to the home owner. This encourages owners of homes and businesses to invest in solar panels and produce renewable energy, thus reducing their negative impact on the environment.
Find out what incentives are available for solar power in your area and then research solar panel prices. Solar Power Subsidies by Coleen Regis.