“Feed in Tariffs”: Providing a healthy ROI from Renewable Energy Investments
In my last post, I discussed the need for government mandates to stimulate the use and production of green energy. As I reported, President Obama has taken the necessary steps to move forward with renewable energy by mandating 10% of the energy portfolio in the US to be of renewable sources. However, the US—even with a solid renewable energy policy written into the Economic Stimulus Package—is not a global leader in renewable energy. Instead, it’s Europe leading the way with progressive and innovative renewable energy policies.
In Europe, government policy does not stop at mandating the use of renewable sources. Policies are in place providing incentives for homeowners and businesses to generate renewable energy. Using a “feed in tariff” system, a utility company will pay four times the rate of coal energy—vastly above the market price—for the renewable energy produced by private citizens.
A “feed in tariff” system not only shifts the weight of subsidizing the production of renewable energy away from the taxpayer to a utility company but also provides a guaranteed return on investment for homeowners and business owners who install solar panels or wind turbines.
Like mandates, incentives will be a key driver in transforming the electrical grid around the world. I’m happy to see such innovative policymaking drive the prominence of renewable energy in Europe. Now, let’s wait and see if other regions follow the lead of European countries.
To learn more about the “feed in tariff” program, read this New York Times article.
