Successful policy actions to promote renewable energy

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The world is in need of a major transition to satisfy skyrocketing energy needs. Government policies will be crucial in the deployment of renewable energy, especially in emerging or developing economics. A larger shift in investment priorities, however, is needed to ensure even growth in different regions and steady cost decreases in all renewable energy technologies.

Policymakers will play a large role in this shift. Among the things they can do to get the energy transition on track is to focus on substantial investments in the renewable energy sector. Already, global investment in renewable energy increased seven-fold between 2004 and 2010. Bloomberg New Energy Finance (BNEF) last year noted that total new investment in 2010 was more than US$266 billion.

Yet more funds are needed going forward. Robust and transparent government policies that support the reduction of investment risk and reduce project costs, can help to attract new financing for deployment projects, manufacturing facilities and associated infrastructure. A combination of rebates and investment incentives, low-interest loans and revolving public funds has been shown to work.

Policymakers can also adjust and innovate policy to engage new financing sources. These could range from pension funds to insurance funds, private investors, cooperatives, wealthy companies that want to expand into "green" options, and even recent inventions like "crowd funding".

Policymakers can also emulate best practices and success stories. For instance, a number of countries in the transport sector have put together a series of rules and incentives to boost the use of renewable energy. For example, domestic bio-fuel blending obligations together with tax policy.

Looking ahead, policymakers will also have to continuously market the potential of renewable energy to their respective stakeholders. They will have to institute policies to overcome barriers and misperceptions, such as the inaccurate perception of the relative costs and benefits of renewable energy and opposition from major players and inertia in the traditional energy system. Below are the six categories of policy actions they can focus on.

1. Alliance building to lead the paradigm change

The move towards sustainability cannot come from the top down. New alliances are required among policymakers, investors, environmental organisations, businesses, communities, households, countries and regions to ensure a comprehensive stakeholder engagement that contributes to sound policy design and implementation.

2. Communicating and creating awareness on all levels

The broader public needs to understand the potential of renewable, while policymakers need to understand what is required to attract investment and to advance renewables. Renewable resource potential needs to be measured and information made accessible, while skilled workforce in the area is also required.

3. Target setting at all levels of government

Realistic but ambitious long-term and interim binding targets at different levels of government are necessary. Such targets need to be grounded on clear general goals. They need to be advanced by specific renewable support policies that promote not only the deployment of renewable technologies, but also the development of need infrastructures.

4. Integrating renewables into institutional, economic, social and technical decision-making processes

Countries should take advantage of synergies with energy efficiency by integrating various areas of policymaking and renewable energy. By integrating renewables into policies of innovation, finance, spatial planning and broader economic development, renewable energy will achieve a higher status. This will help reduce regulatory inconsistencies and barriers to their deployment.

5. Optimising policy instruments

Proven policies should be adapted and optimised to national or local circumstances and needs. Stable and predictable policies are needed to gain investor confidence and are generally more effective than switching policies midstream.

6. Neutralising

Subsidising energy from fossil fuels, for example, will lead to distortions in the playing field. Integrating external costs and benefits such as climate change and health impacts into energy prices will help level the playing field for renewables. Pricing carbon by taxing CO2 or establishing an emission allowance market is an example of such policies.

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About the IEA Renewable Energy Technology Deployment (IEA-RETD) Implementing Agreement

This is an article extracted from the International Energy Agency. Titled “Successful Policy Actions to Promote Renewable Energy”, the article cites six categories of policy options that can encourage the growth of the renewables sector.