Just as the cost of subsidizing clean energy such as offshore wind is plunging to levels that make it cost-competitive with old energy, the US is proposing to subsidize coal by the back door.
US energy secretary Rick Perry has asked the Federal Energy Regulatory Commission (FERC), the independent body that regulates wholesale electricity markets in the US, to adopt an anti-market plan to subsidize the coal industry, just as developers of offshore wind have begun talking to large corporates about selling them green electricity, rather than sell it on the wholesale market, a concept that, ironically, was pioneered in the US.
Secretary Perry has asked FERC to draw up plans to make payments to power plants that have 90 days of fuel on site – in an attempt to boost ailing coal industry in the US – just as the concept of Power Purchase Agreements (PAAs) takes off in Europe.
Until recently, developers of offshore windfarms have relied on subsidies, but as the cost of offshore wind has fallen steeply, it has become, to quote Professor Dieter Helm, author of the UK’s recent report on the cost of energy, one of the ‘new conventionals.’ Offshore wind is now cost-competitive with other forms of energy. Large corporates want green power, and PPAs provide energy-intensive industries with an opportunity to buy into multi-year supply contracts.