Subsidy policies—no matter how well intentioned—are often difficult to effectively design and implement. Understanding exactly how and why subsidy policies have caused problems in one context, while succeeding in another, can be instrumental in designing effective support schemes. This series of case studies aims to provide an authoritative account of some of the highest profile "cautionary tales" in the world of renewable electricity subsidies, asking: What exactly went wrong? And how can other countries avoid the same problems?
Wind Power in China: A Cautionary Tale
Over the last 10 years, China has seen an unprecedented deployment of wind power, with capacity growing from 1.26 gigawatts (GW) in 2005 to 91.4 GW at the end of 2013. This report takes a closer look at the drivers behind the impressive wind power development in China in order to understand the complex connection between the policy goals, policy measures and development impact. In particular, it considers two related issues that have been encountered—curtailment of generation and delays in connection of projects—and how these are being addressed. The report aims to identify the lessons to be learned to inform future policy measures in China and elsewhere.
India's Accelerated Depreciation Policy for Wind Energy
In recent decades, wind power in India been deployed at a tremendous rate, such that wind power projects now account for two thirds of total renewable energy generating capacity and almost one tenth of total installed generating capacity. This case study examines one of the policies that is widely considered to be the primary driver behind this expansion—accelerated depreciation (AD) for wind power projects. It considers not only the increase in wind power capacity and to what extent this can be attributed to the AD policy, but also how the policy has affected wind power generation and the development of the wind turbine industry in India. The analysis draws on research conducted to date on this and similar policies in other countries (notably the United States), as well as on a series of interviews with industry stakeholders. It draws conclusions on the positive and negative lessons that can be learned from the AD policy and how these could be incorporated into future policies in the sector, both in India and elsewhere.
Spain's Solar PV Investment Bubble
This study provides a detailed exploration of the events leading up to, during and after the notorious Spanish solar PV bubble—when a sudden and unexpected burst of investment in solar PV led to skyrocketing policy costs, and ultimately resulted in the government taking retroactive measures to reduce the subsidy promised to developers.
The most important lesson is a simple one: cost control matters. A renewable energy subsidy that does not incorporate cost control mechanisms is a risk for the entire sector. The hardest lesson is that there is no obvious way to manage a crisis if it emerges. Mistakes happen. And when they do, there is no clear good practice for how to balance taxpayer or ratepayer interests against the need for a stable renewable energy industry. Three principles emerge from Spain’s experiences. First, to design policy in a way that avoids any kind of cost crisis. Second, to ensure that appropriate tracking mechanisms are in place so that government can detect and react to problems promptly. Third, if neither of the prior two strategies have been pursued, and a crisis occurs, to resolve the crisis in a way that seeks to limit the damage as best as possible.