Wednesday, March 10, 2010


It is well known that most forms of green energy cannot compete successfully with that generated using fossil fuels and long term policies to establish alternate energy systems must subsidize entrepreneurs venturing into this field in order to bring down their market price. This obviously does not mean that alternate energy industry must be on a perpetual subsidy "diet" for survival. With fossil fuel sources declining continuously, the cost of drilling and distribution may make them increasingly costlier in the coming years. But how a subsidy regime can go terribly wrong is borne out by the experience of Spain which was in the fore front in 2008 by installing half the global solar energy installations in the world.

"But as low-quality, poorly designed solar plants sprang up on Spain's plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own. For now, electricity generation from the sun's rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself, rather than just costly energy and an economic flash in the pan like Spain's".

Probably there are lessons to be learned from Spain's experience by other countries because solar energy is still the most attractive option in any alternate sustainable energy plan or program. Italy, where energy cost is one of the highest in the world, working out to almost 45 cents a unit, is probably the only country where solar energy can compete successfully using modern technology. Increased cost of fossil fuels and depleting global sources may make fossil based energy increasingly costlier while solar power plants may see progressive reduction of cost of generation with continuous improvements in technology.


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