Cancun: So, Where Is the Global Feed-in Tariff These Days?

The movement of ideas through the international system is a mysterious thing. Consider, for example, the circuitous journey of the “Global Feed-in Tariff”: this is the idea of guaranteeing the purchase of renewable energy by electricity utilities, supported by a subsidized price. What is happening with this potential global climate-game winner?

The feed-in tariff model (to simplify, “tariff” means “price support” in this case) has worked brilliantly to spread wind and solar energy in countries like Germany and Spain. Too brilliantly, worry some experts, who point to grid over-load risks. Other experts say that risk is remote. But in the rest of the world, “too much solar energy” is hardly the problem. Despite the amazing, astonishing spread of the stuff, and the steady drop in prices, wind and solar energy are still (says conventional wisdom) “too expensive” compared to “conventional” sources like coal and natural gas.

We’ll leave aside the obvious problem of the environmental and social externalities– like CO2, health effects, oil spills, and coal mine catastrophes– that are still giving the “conventional” energy sector a free ride in the global economy. Let’s assume the problem really is just price.

That’s where the global feed-in tariff comes in. It solves that problem, by supporting the prices in a big way now, and then tapering off that support as scales increase, technologies improve, and the market kicks into overdrive.

Though we often pretend otherwise, the price of energy is not a law of nature. It is a social decision. This is not to say that all energy prices are socially controlled– except, of course, in those countries (and there are really quite a number of them) where the price is absolutely controlled. But even in the freest of free markets, the price of energy is the result of a number of other decisions– such as where subsidies, explicit and implicit, are placed.

Fossil energy sources enjoy numerous subsidies, of both the explicit and implicit kind. A feed-in tariff for renewables levels (or even tips) the playing field in the direction of renewables, in an explicit way.

“Global” means doing it globally, country by country.

In a paper I worked on for the United Nations Division of Sustainable Development (UN DSD) in 2009, we put forward a brilliant plan (I can say that because the plan did not originate with me) to take feed-in tariffs global, and quickly. One model is the microchip industry, which was super-accelerated by guaranteed US government purchases, at prescribed prices. Another is the Green Revolution, which spread agricultural technologies internationally through a combination of policy, subsidy, and extension (technical support and training) programs.

The “Big Push” strategy we outlined, which was the brainchild of UN DSD director Tariq Banuri, involved ratcheting investment in renewables way up in developing countries, where the need for speed, as well as reduced price, was most acute. The rough cost was a cool $1 trillion, or about 10 years worth of the $100 billion per year commitments that were ultimately made at Copenhagen. Ah, but the payback– in improved living standards, economic development, income per capita, market expansion, technology acceleration, and of course emissions reduction– was truly enormous.

The December 2009 strategy paper (“Technical Note” in UN parlance – download it here) mapping out this plan was presented at Copenhagen. It was endorsed by a roster of well-known international climate and energy experts, as well as several leading NGOs. Goodness, I even personally handed over a copy to Al Gore, when I bumped into him in the halls of the Bella Centre. And then…

Well, it’s hard to say what happened then. Is the idea taking off? Or has it ended up in a political backwater? I’m not in Cancún, and I’m not at all involved in CoP-16 this year. I have no inside information. Here is the little bit that I know, and I’ll happily update this post once Cancún is over, once I learn a bit more.

In April 2010, Deutsche Bank, working with the UN Secretary-General’s Advisory Group on Energy and Climate Change, put forward a program called “GET FiT“– the Global Energy Transfer Feed-in Tariff Program. Where our paper (and many other similar proposals from outside the UN system) left off, GET FiT appeared to come in, with all the juicy details of a scheme that covered everything from the funding mechanisms, to policy change support, to the various kinds of insurance and assurance the partner countries would need to participate.

The document from April 2010 is beautiful and convincing. Even just the name “Deutsche Bank” gives the program such an air of solidity and reality.

But the paper says nothing about the scale of investment that is actually necessary to transform the world’s energy system, and to bring solar-powered light and wind-powered opportunity to the world’s poor. This was a key feature of the “Big Push” concept: only by increasing the scale massively (again, think about the dawn of computer chips) can you bring down the price rapidly.

US $3 billion, said Deutsche Bank’s climate advisory group, could buy you 1 GW of renewable energy (off-grid and on-grid), and attract $4 billion in private financing. But over 100 extra GW of wind energy are needed to make it globally affordable, and over 1,000 extra GW of subsidized solar– hence the need for the word “trillion” in investment terms. Last I heard, the World with a capital W was still stuck somewhere in the low billions per year in terms of investment mobilization, north to south. The word “loan” had started to replace the word “investment”, with worrying frequency.

And that’s where my knowledge ends for the moment. Let’s see where Cancún takes us … and then, it will probably be time to revisit, and re-push, on the Big Push.

NOTE: this issue will be addressed in Cancún in a side event on Tuesday 7 December, 20:15-21:45, Mamey Room – Cancunmesse.

Alan AtKisson is the CEO and founder of the AtKisson Group, a Sustainability Learning, Strategy and Inspiration Company advising governments, organizations and corporations worldwide for a decade.