Did you know that wind energy technology has been installed and generating electricity for more than 30 years?
As countries around the world wake up to the promise of renewable energy, they begin by passing regulations and offering subsidies to encourage its growth. Such is the case with wind energy over the ages, as you will see in the animation below.
What do countries do to encourage renewable energy growth?
In the very beginning, when a government wants to encourage a new technology, it may give out grants to help cover the costs of developing it. For example, in Denmark, the government awarded grants of up to 30 percent of the installation costs of a wind project between 1985 and 1988 in order to encourage the installation of 100 MW of wind energy capacity. (Learn more about the history of wind in this market overview piece by the IRENA.)
Another renewable energy policy is the Feed-in Tariff (FIT). This is generally a set amount that utilities must pay for generated renewable electricity. This means that developers have a guaranteed rate-of return for the wind energy they generate. In theory, the FIT is supposed to cover the difference between what the developer must sell the electricity for in order to cover installation costs and the going rate for electricity. For example, in the 1990’s in Germany, the FIT was set at 90% of the retail cost of electricity. In Denmark it was set at 85%. According to wikipedia more than 50 countries worldwide have FITs in place for renewable energy.
One criticism of FITs is that if technology costs drop faster than the FIT rate, developers rush to the market in order to take advantage of the high profits that they can earn from the subsidies.
Other markets, such as the UK, have adopted a subsidy known as the Contract for Difference (CfD). This policy allows renewable energy generators to enter into long-term contracts with Low Carbon Contracts Company (LCCC) that guarantee a set price for the energy they produce, called the strike price. The energy is sold on the wholesale market and when it is sold for less than the strike price, the LCCC pays the generator the difference. However, if the price of energy spikes and the generator receives more than the strike price for energy, the generator must pay the LCCC the difference.
Then there is the tax credit, which is widely used in the United States. For U.S. wind developers, the production tax credit (PTC) means that developers can deduct from their tax bill a certain amount of money for every kilowatt-hour they generate from their wind farms. In 2015, the PTC was set at 2.2 cents per kWh for the first 10 years of a facility’s operation, and it has stepped down incrementally since 2017. It is currently set at 60% of that number (1.32 cents per kWh) and was set to step down in 2020 but the U.S. congress recently extended it until the end of 2020.
China, today’s leader in wind energy generation enacted a very generous FIT in 2011 at US 7.5 cents per kWh.
Watch the animation below to see how wind energy generation has increased in different countries over the past three+ decades. It’s fascinating to see how quickly some countries rose to the top and then fell as other overtook them in terms of wind energy generated.
Wind Generation in Gigawatt Hours
Thanks very much to our friends at Creative Nurds for the animation.