Straight talking: Time for polluters to go without subsidies, too

WORLDWIDE: After spending the best part of the past 20 years defending renewable energy in general - and wind in particular - from being dismissed out of hand as too expensive or unaffordable, I think it's safe to say that we're past that conversation in many, if not most, countries. That's not everywhere, of course, and not for offshore - yet.

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However, what we are still left with is the question, which comes up frequently: "Well then, how much does wind power cost?" Good question, but we must distinguish between cost and price. On cost, the only real answer can come from the producers who are selling into the electricity market, and generally, they are not telling. Presumably, in the overwhelming majority of cases it costs less than the price they are getting for their product. On price, there is a lot to say, but no single answer.

We can respond with some of the "good news" stories, such as the price of wind power coming down by more than 50% in the US over the past five years; or the very low prices achieved in the auctions in Brazil, South Africa and elsewhere, making wind power the most competitive form of new generation in an increasing number of markets. On 22 April, the lowest bid in the new Egyptian tender was just $40.68/MWh.

But then, we also have to do a lot of explaining as to why wind power is so expensive in Japan, which is actually due to a unique and bizarre combination of regulatory hurdles as well as the extraordinarily high EPC costs in that country.

Global fog

Despite the excellent work done by the IRENA Renewable Cost Alliance ( and others, comparing the price of wind energy across countries and currencies often makes little sense, as they fluctuate dramatically due to unrelated factors, in particular with currency movements. For instance, if we're measuring in US dollars, then the price of wind power in Brazil has fallen by nearly 40% in the past few months; the reality, however, is that it has stayed pretty stable through the past few auctions. What matters, in the end, is the price of wind power in the currency of the country in the context of the price of everything else.

Subsidy fog

If I had a nickel for every time I've been asked, "When will wind power be able to make it on its own, without subsidies?" ... well, I'd have a lot more nickels. The fact is that wind power is already competing (often against heavily subsidised incumbents) in an ever increasing number of markets around the world without a feed-in tariff, premium, or certificates. Prime examples would be Brazil, Mexico, Turkey, South Africa, and New Zealand. In fact, New Zealand is the only OECD country to implement the free market economic principles of the Washington Consensus and remove subsidies completely from both agriculture and (well almost completely) from the power sector. And wind is very competitive in large parts of the US as well.

But my usual response to that question is to pose another question: 'When will coal, gas, oil and nuclear be able to make it on their own without subsidies?'

As IEA chief economist Fatih Birol has pointed out, governments globally are currently subsidising fossil fuels to the tune of about US$110/tonne of CO2 emitted; subsidising consumption by more than half a trillion dollars annually (mostly outside the OECD), with production subsidies at more than US$100 billion per year (mostly OECD countries); and that is the most conservative set of numbers out there. As for nuclear, what sort of price do you add to take into account the governments insuring them against accidents because no insurance company will cover them? Ask the Japanese government how much Fukushima has cost so far, and for how long they expect to be paying billions annually. Not to mention the fact that states have assumed long term liability for the millions of tons of dangerous radioactive waste for hundreds or thousands of years into the future. Once you've calculated that, come back and ask me about "subsidies" for renewables.

I put "subsidies" in inverted commas, because I prefer to call it "compensation". Compensation for the fact that both the market and the regulators allow conventional power plants to pollute the air, water and land, cause millions of premature deaths, damage to infrastructure, buildings and agriculture - all for free.

At the end of the day, governments make a choice about the kind of energy system they want, and set the regulations or market rules to make it happen. What we can say, pretty much across the board, is that wind power can no longer be ruled out on the basis of price.

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