Subsidies are financial incentives, usually paid by governments to encourage the production of something. There are many reasons that a particular product might be beneficial to the community, but not economically feasible to individuals and businesses. Many products are subsidized to support local businesses, reduce the amount of imported goods, provide employment and encourage environmentally friendly practices. The energy industries (coal, oil, nuclear, alternative) have always worked in an environment where subsidies have been used. The most recent trend, however, is to subsidize green renewable sources of energy, like wind and solar, so that they’ll be competitive with traditional but environmentally damaging fuels. Alternative energy subsidies include Feed-in Tariffs and financial incentives to photovoltaics.
Each country’s goals may be different, so naturally they use subsidies differently to move toward their objectives. One common goal is to encourage people to use a fuel source that can be produced locally, thus promoting employment in their own country and reducing dependence on fuel from foreign countries. They may use subsidies on production rather than consumption of a locally produced fuel in order to increase the export of that product.
Subsidies are often used to bring about economic benefit for the people the government is trying to look out for. Examples of this might be reducing prices of a product to help the poor or increasing employment in a specific area. Sometimes international treaties come into play. For example, countries might impose tariffs or subsidies to reduce the consumption of some forms of energy and increase the consumption of others to comply with an agreement like the Kyoto Protocol.
Those who oppose subsidies will often use arguments that they distort the free operation of the marketplace, they do not necessarily benefit the people (e. G. The poor in underdeveloped countries) they were supposed to help, and, in the case of energy subsidies, they encourage increased consumption and waste.
Many countries now have policies for encouraging renewable or alternative forms of energy. In addition to the fact that protecting the environment is good for each country individually, international agreements often drive the need for such national policies.
Fossil fuels, such as coal, oil and natural gas, release carbon dioxide into the atmosphere when they are burnt. This adds to the green-house effect (a natural effect in the earth’s atmosphere), making the earth warm up (global warming). A main aim of policy in many countries, is to reduce the use of fossil fuels, and to encourage sustainable and renewable energy, using alternative, carbon-neutral sources, such as biomass fuels, solar power, wind power, tidal power, hydro-electricity and (more controversially) nuclear power. You can see the effect of subsidies on the prices of solar panels for sale in the U.S.
Alternative energy subsidies support those policies. Financial incentives to photovoltaics and feed-in tariffs make it beneficial to consumers to install and use renewable power sources. Grid parity is achieved when the cost of renewable electricity drops below that of conventional sources. The incentives and subsidies are intended to help accelerate the move to parity.
When a government pays the producer of renewable energy for each unit of power the produce, that’s called a feed-in tariff. Traditionally utility companies and their partners are considered suppliers, while homes and business that buy and use electricity are considered consumers. Now that the owners of homes and businesses can produce their own electricity, and sometimes even feed power back into the grid, homeowners and businesses can be suppliers too.
When solar panels are purchased and used by a private individual or business, they may generate more electricity than the home or business need, especially at certain times of the day or year. Feed-in tariffs allow the owner to feed that electricity back into the grid. The electricity company is obliged to buy that power, sometimes at a rate which is quite favorable to the home owner. This encourages owners of homes and businesses to invest in solar panels and produce renewable energy, thus reducing their negative impact on the environment.
Find out what incentives are available for solar power in your area and then research prices of solar energy systems. Solar Power Subsidies by Coleen Regis.
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