International Economics of Renewable Energy
Energy is a critical component for every economy and society around the world. Energy is divided into two groups, nonrenewable (coal, oil, natural gas, and nuclear) with a finite amount found around the globe and renewable (hydro, tidal, solar, wind, geothermal, and biomass) that are constantly being replenished so that they will never run out (Green Energy Choice, 2011). The international economic impact of renewable energy is explored by examining subsidies, strategic policies, and comparative advantage of renewable energy.
Renewable energy in its various forms can be over 5 times more expensive than conventional types of fossil fuel forms of energy generation and none are more efficient than most forms of natural gas or coal energy production (US Department of Energy, Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, 2011). In an effort to promote renewable energy governments around the globe have pledged their commitment to the development of renewable energy in the form of subsidies.
Feed-in tariffs have become a popular way to promote renewable energy for many governments on all levels. Feed-in tariffs work by setting a rate that renewable energy producers will be paid for energy over an extended period of time and the local utilities are required to accept all renewable energy to their grid at the stated rate of payment (Mendonca & Jacobs, 2009). Feed-in tariffs have been so successful because they are inclusive to all types of renewable energy, provide a stated fixed rate to be paid for cost analysis, and have no real cost impacts to governments because the end users are paying for the program in the form of high energy costs (Mendonca & Jacobs, 2009).
Government mandated levels of renewable energy use required by be used by energy companies have been increasing around the globe on national, state, and local levels. The state of California has set an aggressive schedule for the required amounts of renewable energy use, stepping from 20% in 2013, to 25% in 2016, and finally 33% by 2020 (DSIRE, 2011). By setting required levels of renewable energy to be used by energy companies the government leaves it up to the generator to develop the most cost effective source of renewable energy and the government faces small cost impacts because the brunt of the costs are forced on the users.
Subsides are being provided directly to renewable energy generators by governments all over the world. German has launched an aggressive campaign to have 100% of its energy come from renewable sources. The German government gives direct subsidies to individuals and businesses for the installation of roof top solar panels on their property, thus making renewable energy more attractive for small renewable energy generators (Burgermeister, 2009). Direct subsidies have become a required part of renewable energy for small producers to find it cost effective and...