8. Economic policies to promote wind energy
The development of any renewable energy technologies rely
primarily on adequate energy support systems. Effectiveness of RE
support policies banks on the suitability of providing support to
the companies and bodies investing in RE technologies. Therefore,
it is inevitable that the governments develop the laws/regulations
and guidelines to administer these policies. The requirements to
stimulate growth of wind energy include the engagement of large
investments and a predictable, transparent, and stable policy framework
that covers all aspects of the area. Increasing energy
demand and international pressure on carbon reduction have
forced countries all over the world to develop and adopt RE support
policies.
In broad terms, these support policies can be categorized as
price based and quantity based [152]. The goal of expanding RE
can be achieved by stimulating demand either by setting a price or
by allocating RE generation to some specific amount. Fig. 14
represents popular RES-E support policies with their subdivisions.
Feed-in tariff (FIT) systems are the oldest and most extensively
used RE support systems around the world. These policies have an
edge when compared with others due to its better dynamic efficiency,
low transaction cost, diversity, and high investing securities.
The foundation of FIT policies is the guaranteed set of prices
on the electricity generated with a RES during a particular period.
Fiscal tax and investment incentives are also provided by governments
and organizations for the development of RES-E technologies
[153,154]. In the USA, Modified Accelerated Cost Recovery
System (MACRS) is one such scheme under which the US Government
offers depreciation for a five year period.
Renewable portfolio standards (RPS) is a policy instrument that
places an obligation on electricity generation companies to generate
a specific amount of electricity by RES-E and provides certificates
for each unit of electricity produced. These companies
have flexibility on how they complete the imposed requirement.
Moreover, these certificates can be traded or bought by others in
order to comply with their RES-E quota and avoid penalties [155].
This scheme proved to be very efficient in some states of the USA,
where a law that fixes the target of RE to be generated has been
passed.
Competitive auction is a popular mechanism for governments
to possess RES-E at a reasonable cost. Governments release tenders
to install renewable energy capacity in a specific period of
time. Then, to accomplish the target, most enticing offers from the
RES-E generators are selected by placing bids [156]. Another
scheme is net metering in which excess electricity produced from
a RES-E system (example: system owned by an individual residential
customer) can be delivered back to the utility grid. Since
this meter accounts for the kW h generated back to the grid,
customers get a deduction or even credit on electricity bill. Unlike
FIT, net metering utilizes only one bi-directional meter and does
not require any contract between customer and electricity providers
[157].
The degree of effectiveness of these policies varies among different
countries and regions [158]. The US is seeking to get 20% of
the country's electricity from wind by the year 2030 based on
federal as well as state RE regulations. In the US, several states
have different policies that reflect different installed renewable
capacity targets. The US has the production tax credit (PTC) and
Renewable Portfolio Standard (RPS) subsidy as renewable support
systems. The American Recovery and Reinvestment Act (ARRA) of
2009 canceled the subsidized energy financing restriction on the
Investment Tax Credit (ITC) in order to allow businesses and
individuals to qualify for the full amount of ITC [159]. Production
tax credit (in the US), Tradable Green Certificate (in European
countries and Australia), and the European Energy Programme for
Recovery (EEPR) are other schemes that provide support to wind
energy development. Furthermore, EEPR provides financial support
for highly strategic offshore wind power projects in Europe
[160,161].
In 2013, India's Ministry of New and Renewable Energy (MNRE)
released the Draft National Offshore Wind Energy Policy (DNOWEP)
to promote offshore wind energy. The Policy is a result of
India's National Action Plan on Climate Change and commitment
to carbon mitigation [162]. China has implemented three levels of
renewable energy policies. The first two levels are established by
the central government and the third by local governments [163].
A RES support system can greatly facilitate the growth and
development of the renewable energy technologies.