Feed-in Tariffs – WIND WORKS

Oscar Wilde famously wrote that people “know the price of everything and the value of nothing” suggesting there is a difference between the two concepts of price and value. In the power market, due to some of its structural features, it is even more confusing as you also need to deal with the cost of power, which may again be different.

The below, derived from an article I wrote almost 15 years ago, tries to make sense of the differences between the 3, and how these are ultimately decided by political choices.

Solar PV in bioenergiedorf Juende, Lower Saxony, Germany.

Hungary could start accepting household applications to join the country’s feed-in tariff scheme again “as soon as this year,” Minister of Energy Affairs Csaba Lantos said in an interview published in the latest issue of weekly Mandiner.

After decades of ideological mismanagement of the blocs’ electricity market policy, change may be on the horizon. The EU’s policy has nearly obliterated the continent’s renewable energy industry, leading to the easily predictable–and predicted–dependence on Russian gas and oil. It took the invasion of Ukraine and skyrocketing energy prices for the EU to ask “how did we get it so wrong.”

Lazy and Incorrect Use of the Word Subsidy

A “subsidy” is a straightforward allocation of taxpayer money by a public authority to prop up the production of a good or service by the private sector, used to offset market failures and externalities for a greater good. A CfD, however, is a contract whereby one party (public or private) trades a volatile price for a good against a fixed price for the same good, and another party takes the symmetrical position. They are obviously different things.