Taxes and incentives for renewable energy | 2
2013 Industry trends
The global energy system based
on hydrocarbons is undergoing a
foundational shift. No one disputes the
need for increased energy supplies.
Global demand for electricity is
expected to rise by more than
80 percent from 2010 to 2040, driven
by an increase in total population and
gross domestic product (GDP) output.
To address world energy demand, the
energy industry has seen a recent
resurgence in oil and gas production,
led by the “shale gale” of natural gas
made available with hydraulic fracturing
(fracking) and horizontal drilling in
the US In addition, global fossil fuel
subsidies rose almost 30 percent to
USD523 billion in 2011, primarily for oil
development in the Middle East and
North Africa.
10
Nevertheless, the feasibility of a
carbon-based energy system is being
questioned. Economic development
across Europe is hampered by
continued high oil prices, and signs of
an unsustainable energy system persist,
with CO
2
emissions at a record high.
Accordingly, economies around the
world are increasing their dependence
on sustainable energy sources to
help reduce greenhouse gas (GHG)
emissions and pollutants. Renewables
have also been recognized as a way to
stimulate economies, enhance energy
security and diversify energy supply.
In terms of renewables policy, the EU
continues to lead the world in its support
for less carbon-intensive electricity
generation, with 65 percent of electricity
now being generated from nuclear and
renewable fuels. Europe increased its
wind energy capacity by 12.3 percent
in 2012,
11
and 20 percent of Europe’s
power is targeted to come from wind
generation by 2040. A European
Commission report indicated that
renewable energy could meet 55 to
75 percent of final energy consumption
by 2050, compared to less than
10 percent in 2010.
12
The United States is expected to see a
significant growth in domestic natural
gas production, which might impact
policies that support renewables.
Continued low gas prices, for example,
would likely reduce the value of
purchase price agreements available to
generators, including wind developers.
However, the federal Production Tax
Credit for wind was extended for a
further year by Congress at the start of
2013. The Clean Energy Standard Act of
2012 is currently under consideration
by the US Congress, and this law would
set the first nationwide targets for clean
electricity, defined as energy produced
from renewables, nuclear power and
gas-fired generation. The Renewable
Fuel Standard, adopted in 2005 and
extended in 2007, mandates 36 billion
gallons of biofuels to be blended into
transportation fuel by 2022.
In China, electric energy demand is
expected to more than double by
2040.
13
Despite the continued use of
large amounts of coal and gas, China is
also adopting the European and the US
approach to shift electricity generation
away from coal. China’s renewables
policy is based on the 2005 Renewable
Energy Law. In 2009, China set a target
to increase the share of non-fossil
energy (nuclear and renewables) in the
power sector to 15 percent by 2020.
The 12th Five- Year Plan (2011-2015) calls
for 70 GW of additional wind capacity,
120 GW of additional hydropower and 5
GW of additional solar capacity by 2015.
Targets have also been set for the first
time for geothermal and marine power.
Japan’s renewables energy policy
was reviewed and extended through
legislation passed in 2009 and a revised
Basic Energy Plan in 2010. After the
events at Fukushima, the government
announced the Innovative Strategy
for Energy and the Environment in
September 2012, which includes the
goal of reducing the role of nuclear
power. This will be supported in part by
increasing the deployment of renewable
energy. By 2030, the strategy calls for
power generation from renewables to
triple compared to 2010, reaching about
30 percent of total generation. In July
2012, Japan launched a new feed-in
tariffs system for wind and solar power
and other renewables, providing a
generous amount of incentives.
Overall, the global adoption rate of
renewables policies has slowed
considerably, especially as compared
to the early-to-mid 2000s. Revisions
to existing policies are becoming
increasingly more common, as well
as new types of policies that combine
energy-efficiency measures with the
implementation of renewable energy
technologies.
14
Looking ahead, recent analysis has
suggested that the following global
milestones will be reached by 2035:
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• Demandforelectricitywillgrowby
over 70 percent.
• Overallenergydemandwillriseby
over 30 percent.
• Generationfromrenewableswill
increase to almost three times its
2010 level.
• Theshareofrenewablesinthe
generation mix will increase to
31 percent.
Greater energy efficiency in building,
heating, transportation and
manufacturing will help offset the rise in
energy demand. However, renewables
will play a vital role in addressing
this demand in an environmentally
supportive and sustainable manner.
10
Op. cit., World Energy Outlook 2012
11
EurObserv’ER, Wind Power Barometer
12
Rethinking 2050, European Renewable Energy Council, 2010
13
Op. cit., World Energy Outlook 2012
14
Op. cit., REN 21 Renewables 2013 Global Status Report
15
OECD, International Energy Association (IEA), World Energy Outlook 2012, REN
21 Renewables 2013 Global Futures Report
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