Domestic incentives for renewable energy production
To combat climate change, several States have created so-called ‘renewable energy incentivization schemes’ because they feared that private investors may otherwise not be willing to invest in this industry. Compared to other sectors, renewable energy investment usually requires significant upfront capital investment, while returns may be unsure and take a longer period to materialise.
Renewable energy incentivization schemes typically provide for a secure power price, buy-out options, government-supported loans, etc. By offering feed-in tariffs, for example, the host State commits to buying the generated green power for a certain period of time (25 years or even longer) at a fixed rate, regardless of the real market price.
Some States seem to have been unprepared for the success of these incentivisation schemes and have difficulties in fulfilling the financial aspects of their own schemes. Combined with the budgetary problems caused by the financial crisis and/or a reprimand from the European Commission, which was of the opinion that some of these stimuli formed prohibited subsidies (State aid) under EU law, States have amended or terminated their programmes. Some have even sought to reclaim the sums already transferred to investors. Read the rest of this entry…