Wednesday, June 01, 2011

Arguments against my arguments against feed-in tarriffs

Since my goal is not really to try to convince people of my point of view as much as measure it against my own logic, I think it is time to look at it from the opposite angle for a little while.

Valid points made against me:

- Take up has been at a higher percentage in the country than the city - This does not mean that more actual generation capacity or instalments are in the country than the city, but it still is counter-intuitive and thus an important counterpoint against my arguments. It means more money disproportionately to the country than the city, which makes a nice change.

- It is development of "power stations" by stealth, avoiding the red tape, delays and NIMBYISM associated in building bigger more efficient (even renewable) ones. If we are looking at generation capacity added per day, with this surge it is quite reasonable amount but spread quite thinly accross the grid.

The biggest Marconomic counter-argument (so far unmentioned) is that this "subsidy" is more similar to the Brazilian ethanol subsidy, and even in some ways similar to the incentives that built the railways in the US and the Managed Investment Schemes (MIS) in Australia that enabled mass planting of a plethora of long term crops such as olives and timber.

The thing that works about these subsidies (whereas European agricultural ones don't) is that the subsidies have leaked a great deal to what would pass as infrastructure. Whereas if the government said they were going to spend $32 Billion over 10 years on solar electric base power stations around the country, it would be voted down, while if we spend the equivalent of $100 billion extra (compared to what we would have with the status quo) Neatly packaged and spread across various risk profiles, REC's and individual investments, people would go along with it.

The Brazilian ethanol subsidy money leaked through to private companies which built efficient ethanol generation and trading infrastructure. The Companies that funded the railway booms became bankrupt, but the railways are still there. The MIS funds are much maligned but they have generated a large "infrastructure" of trees closer to generating income. The German feed-in tarriffs have been incredibly expensive for what they have achieved, and completely distorted the market. However, the result appears to be a semblance of infrastructure. Australia is not repeating the mistakes of Germany, by having a honeymoon period of high tariffs rapidly reducing over a few years, the subsidy portion *may* be temporary, and the constant shifting of the goalposts mean that any tariff regime will not breed dependence on the tariffs from solar panel owners. They already know that they can't count on them being that generous for more than a couple of years.

With all these "infrastructures" built from subsidy money rather than directly, it still is somewhat controlled by the Government(indirectly through the actions of the subsidies), and can possibly fit into the rule of thumb that Governments should own infrastructure, but it usually is a very tenuous control.

1 comment:

Chris Fellows said...

All those arguments against your argument are bogus! What a crock!

Sorry, just had a contrarian moment there...