Carbon pricing
As we explore later in this paper, in many countries we have seen renewables become the cheapest source of newly built power generation.
However, this is not always the case when renewable energy is compared with existing, older fossil fuel power plants, and now is the time to create a level playing field for the renewables industry.
The core policy need is to ensure carbon pricing that adequately reflects the environmental cost of fossil fuel generation.
Carbon pricing
Carbon pricing across global markets would fairly reflect the damage existing fossil fuel plants are doing to the climate with their carbon emissions.²⁷
Alongside improving the business case for renewable energy generation, carbon pricing can also generate additional revenues for climate measures, helping to fund a country’s energy transition.²⁸
A question of policy
Sourcing funding and creating the right environment to encourage investment has always been fundamental to the growth of renewables around the world.²⁹
Policy and regulation have a key role to play here as they set targets, establish the ground rules and lay the foundation for investor confidence. By the same token, in countries where energy policy is unambitious, weak or constantly changing, this is likely to translate into a lack of substantial investment in large-scale renewable projects.
Countries who have set ambitious targets need to then follow through with policy that ensures that those targets are being met.
A question of policy
In many countries, subsidies – in one form or another – proved to be the immediate enabling policy catalyst. But given strong cost declines, it is no longer a question of subsidy levels, but rather of policies that enforce the rapid replacement of the established asset base by carbon free technologies.
But of course, in the absence of targets or where targets are very unambitious, any kind of proactive enabling policy is also typically in short supply. And concurrently, so is any hope of a renewable transition occurring at anything like the pace needed.