Policy Support for Renewable Energy Continues to Grow and Evolve
New Worldwatch Institute trend examines global support for renewable energy production
Evan Musolino is a Research Associate with the Climate and Energy Program at Worldwatch.
|Integrating the Latin American Electricity Grid|
|Growth of Solar and Wind Energy Continue to Outpace Other Technologies|
BY EVAN MUSOLINO | AUGUST 23, 2013
Throughout much of the world, support policies for renewable energy technologies have increased dramatically over the last decade. Historically, policy design has evolved from
The majority of renewable energy support policies worldwide support electricity generation. Regulatory policies such as feed-in tariffs (FIT), net metering/billing, and renewable portfolio standards (RPS) or quotas have been developed to encourage the introduction of renewable energy technologies in the power sector. FITs remain the most widely adopted policy to support renewable energy. Altogether, 99 FIT policies are now in place worldwide at the national or state/provincial level. Municipal governments are also becoming more active in introducing FITs in cities.
Source: BP and REN21
Renewable portfolio standards or quotas for a specific required minimum share of renewable energy now exist in 76 countries, states, or provinces, up from 34 in 2004.
Policies to promote the uptake of renewable energies in the heating/cooling and transportation sectors, still lag behind policy activity in the electricity sector. Policies supporting renewable energy in the transportation sector through mandates and obligations are now in place in 51 countries at the national level. Biofuel blend mandates, a policy that requires a specific quantity of biofuels to be incorporated into transport fuel, are in place in 27 countries at the national level and in 27 states or provinces.
Tax incentives are being used to spur developments in the renewable energy sector in some 66 countries as of early 2013. Tax incentives can take many forms. Production tax credits, a main driver of the renewable energy sector in the United States, or investment tax credits allow for investments or stakes in renewable energy projects to be deducted from tax liabilities. Many countries have also enacted measures to reduce or exempt specific taxes on renewable energy technologies—such as value added tax, sales tax, or import duties—in an effort to decrease costs of project development.
As more policies have been enacted, regional diversity has greatly expanded. Of countries enacting policies by mid-2005, most (58 percent) were found in Europe and Central Asia, followed by East Asia and the Pacific (21 percent) and by Latin America and the Caribbean (LAC).By 2013, the share of Europe and Central Asia declined to slightly more than one third of the global total.
The economic diversity of countries enacting support policies for renewable energy has also greatly expanded. High-income economies accounted for 69 percent of all policy support by mid-2005, but by early 2013 this had declined to 30 percent. The other economic groups each increased their share by more than 10 percent.
As the renewable energy sector continues to mature, policymakers face a host of new challenges. While the pace of countries adopting new renewable energy support policies has slowed somewhat in recent years, the sector has experienced a flurry of activity centered on revising existing policy mechanisms. Policy changes have been driven by a variety of factors, both positive and negative.
Rapidly changing market conditions for technologies such as solar photovoltaics, where module costs declined by 80 percent since 2008 and by 20 percent in 2012 alone, have dramatically reduced the level of support needed to make projects attractive to investors and feasible for project developers. Simultaneously, the global economic slowdown left many countries with continuously tight national budgets, which has threatened support for the renewable energy sector. The combination of factors has led to a number of cuts to existing incentive programs.
Additional challenges to the sector have come from the introduction of taxes or tariffs on renewable energy installations or components. Taxes on renewable energy were enacted in Bulgaria, Greece, and Spain in 2012. Trade disputes centered on the international trade of renewable energy components have also become prominent in recent years.
As countries begin to have higher shares of renewable electricity in their national energy mix, policymakers need to address new challenges. Policy priorities are shifting from a need to incentivize market takeoff to ensuring favorable market conditions for the expanding renewables market and seamless integration of renewable generation into grid networks. Despite substantially different degrees of market maturation, renewable energy technologies continue to get support from government policymakers worldwide. This support is expected to continue, and to evolve, as the sector develops.
Further highlights from the report: