Encourage or discourage building solar panels, geothermal, and wind turbines. Renewable energy includes wind, solar, geothermal, hydropower, and other technologies that produce energy with little to no carbon dioxide emissions. Note that nuclear and bioenergy are considered separately.
- Governments offering tax incentives to families installing solar panels on their roofs.
- Farmers and land owners allowing the installment of wind turbines on their land.
- Research and development for improvements to renewable energy technologies in order to improve efficiencies and/or reduce costs.
- Businesses committing to powering themselves with 100% renewable energy.
|taxed||status quo||subsidized||highly subsidized|
|Change in price per kilowatt hour (kWh)||+$0.05 to +$0.01||+$0.01 to -$0.01||-$0.01 to -$0.05||+$0.05 to -$0.10|
|Cost increase or decrease||+30% to +10%||+10% to -10%||-10% to -30%||-30% to -60%|
- Impact. As you encourage renewables, watch coal (brown line) and natural gas (blue line) both shift down in the “Sources of Primary Energy” graph. This shows the benefit of renewables for the climate – keeping coal, oil, and gas in the ground.
- Rebound effect. Subsidies to renewables decrease energy costs, which increases energy demand over what it would have been otherwise (people use more energy when it is cheap). This rebound effect somewhat reduces the positive impact of encouraging renewable energy. View this dynamic with the graph “Final Energy Consumption.”
- Delays. It takes time for the subsidies and encouragement of renewables to show up in installed capacity. Subsidies are phased in over 10 years so note in the “Renewable Final Energy Consumption” graph that the Current Scenario does not immediately differ from Business as Usual.
Why doesn’t encouraging renewables with a big subsidy avoid much future warming alone?
- Renewables only reduce CO2 emissions when they displace fossil fuels. In some cases renewable energy just meets new energy demand and doesn’t replace the demand met by coal and gas.
- There is a rebound effect – in order to grow, renewables are made less expensive. The drop in energy price boosts demand, undoing some of the positive effect.
How can I get renewables to grow faster?
- Discourage coal and oil by taxing them individually or setting a carbon price.
- Adjust the R&D breakthrough cost reduction for renewables to simulate a sudden breakthrough that would dramatically lower the cost of renewable energy.
- Subsidizing renewable energy is a helpful way to keep coal and gas in the ground and reduce future temperature. However, it isn’t a silver bullet.
This sector tracks the time it takes wind and solar installations to move through several stages – capacity under development, under construction, and actually producing energy.
The most important feedback loops in the renewables sector include:
- Overheating – costs go up when demand grows faster than the manufacturing and support industries can keep up.
- Site availability – efficiency goes down and costs go up when renewables are sited in less optimal locations (e.g., solar power in rainy climates).
- Learning effect – every doubling of cumulative production will bring costs down 20% (aka, the progress ratio). Costs come down as supply chains, business models, and production industries grow.
Potential Co-Benefits of Encouraging¶
- Decreased air and water pollution from switching away from fossil fuel sources can improve public health, worker productivity, and savings for governments and households.
- Renewables can help expand energy access during power outages.
- Renewable energy offers opportunities for high- and low-skilled employment.
- Although the price of renewable energy infrastructure continues to fall, many low-income communities remain unable to access the technology in both developed and developing countries. Working to ensure an equitable energy transition can help everyone to reap the benefits.
- Policies in many developed countries limit solar and wind subsidy programs to homeowners, who often occupy higher income brackets.