One of the most popular ways governments prop up struggling green energy industries is by guaranteeing producers above-market rates for their environmentally friendly troubles. In the UK, these feed-in tariffs target smaller producers, but as the FT reports, larger players in the industry have figured out a way to crash the party:
[Wind developers] can install larger turbines — which are more efficient in less windy areas — with smaller generators than would normally go into a machine of that size, in order to get the higher subsidy payments.The practice is known as derating and is legal, but critics have long charged that it means that developers are able to put in bigger turbines and get a better rate of return than originally intended.
This so-called “derating” is great for big wind, but according to this report it’s costing UK energy consumers upwards of £400 million. It’s also exactly what you can expect when you enact complicated subsidy regimes backed by taxpayers and consumers.Don’t expect this to slake the green thirst for a renewables-at-any-cost energy policy. But those environmentalists who are seemingly willing to stomach any electricity rate hike as long as it comes with more solar panels or wind turbines should consider that these kinds of subsidization also carry an opportunity cost. The money spent propping up wind and solar farms currently incapable of competing with fossil fuels on price would be much better spent researching and developing the next generation of technologies that our great green future will really demand.