There are several ways to look at government incentives for renewable energy. Often, the choices that governments have to make are presented as a balance between cost, environmental return, and economic return. But in reality, it is extremely difficult to evaluate such choices by simple calculations of return on investment. The way decisions will eventually turn out is difficult to predict, as it is dependent on many uncertain variables. In other words, the choices incorporate many business risks. This means that governments should choose their energy politics by evaluating the potential plans with due diligence and by making appropriate risk assessments.
In Ireland, the government is currently evaluating the choice between two potential National Renewable Energy Plans. The Irish Times rightly remarked that such a choice should not be taken lightly.
In the longer term, we should all go for a carbon free economy. But the roads to this goal are many. Do we have to go as fast as reasonably possible from the start, or is it more prudent to wait a while and see which way the wind blows, while limiting actions to what is legally required by the Kyoto Protocol? This is the dilemma that governments are facing at the moment.
The first scenario for a National Renewable Energy Plan in Ireland aims at fulfilling the Kyoto requirement for the country, namely to reach 16% of renewable energy by 2020. The second scenario aims at going further than those legal requirements and produce renewable energy for export to other countries. This can be done by making massive investments in off-shore wind, wave, and tidal energy. Such a plan would also bring along the opportunity to make Ireland a test-bed for off-shore energy technologies.
As the Irish Times observes, such a plan is not without risk. It counts on rising energy prices in Europe in the next ten years. If such a price rise should not occur, the technology will remain dependent upon government subsidies. Or, if government subsidies are reduced, the electricity rates in Ireland relative to other countries would skyrocket. Such a scenario would seriously affect the export driven economy of Ireland and could eventually drive the country into an economic and social crisis.
Another risk of such an export plan is to count on the neighbouring countries, mainly the UK, continuing to purchase the renewable energy that is offered. What if those countries suddenly decide to also go for massive deployment of renewables themselves? Exporting thousands of megawatts to the UK and continental Europe would require new undersea transmission cables, incorporating a massive investment that would become useless if the market for exported renewable power suddenly dries up.
In short, depending on the evolution of the energy prices and the politics of other countries, the same national renewable energy plans could end up contributing significantly to a countries economic welfare, or bring it to the edge of bankruptcy. Those are risks serious enough to think twice about before making any decision, even for a government which is totally convinced that a sustainable energy future is essential.Log in to post comments