Saturday, July 23, 2011
I am in Seoul participating in the Korea Legislation Research Institute's conference, "Architecting Better Regulation to Overcome Energy Crisis." The conference has produced a fascinating discussion about how best to transition to a renewable energy economy.
Korea has been using a feed-in tariff ("FIT") system to promote renewables deployment. That changed in 2008 when the system came under criticism, in large part because it placed a strain on government finances. This goes to show that how policies are designed very much matters. FITs that raise consumer prices too much are subject to challenge on that ground, but those that choke government coffers may make the point even more acutely.
The plan now is to switch to a renewable portfolio standard ("RPS"), much like what many of the states in the U.S. are using. It will be a very interesting case study that puts these two mechanisms in sharp contrast. Debates about whether FITs or RPSs are better at incenting renewables deployment are longstanding; others have advocated that they can work together. Korea's change may add some clarity to the discussion.
It may also prove to drive home some of the themes that emerged from the conference speakers:
- Jannik Termansen, a vice president at Vestas, noted that what industry needs is not as much one scheme over another, but rather, "TLC": not tender loving care, but "transparency," a "long-term, stable commitment," and "certainty." He noted that installed wind capacity in the Asia-Pacific region has now surpassed that of North America, and looks to grow even further in coming years.
- Penny Crossley from the University of Sydney argued that renewables are important not just from a climate change perspective but also from that of energy security. "Energy security is another reason why renewables are important," she said. She noted six different ways that renewables promote energy security, and argued that we should commoditize those security benefits.
- Prof. Wu Zhonghu and Libin Zhang reminded us of the heavy role China will play in shaping the world's energy future. They noted that China is now a leader in world energy consumption, and that China remains in a transition from a centrally planned system to a market-based one. How this affects renewables development long-term remains to be seen.
- Nicolas Croquet highlighted the EU's 20-20-20 challenge. It is ambitious indeed: By 2020, 20% renewable energy use, a 20% reduction of greenhouse gas emissions from 1990 levels, and 20% decreased primary energy use. Is this a goal to which Korea, the U.S., and others should aspire? Should we go further?
It is a lot to chew on, both for the energy outlook for Asia and at home in the U.S. as well.