policy widely through society. Policy-makers, not without controversy, have tried
to solve the problem of how to manage interests during transformation discussed
above not so much by balancing them but by beginning to transform energy users
into producers and challenging incumbents directly. It was not clear that this was
intended at the start of the policy, but it has evolved in such a way as to produce
this outcome. In the UK, by contrast, policy has benefited incumbent producers,
but the problem of balancing this approach with the interests of users has become
increasingly fraught over time.
India and China
This framework can also be applied in the very different settings of countries like
India and China. These countries are still at a relatively early stage of transformation
in terms of renewable power. For example, despite rapid growth (Lewis, 2011;
Sharma et al., 2012), wind power as the leading technology in both countries still
only provided 2.5 per cent of total electricity generation in India in 2011 and 1.5
per cent in China. Policy feedback effects are likely to be much weaker at this
stage. However, both countries also have ambitious targets for renewable energy,
and the policy feedback approach can help identify how far, and where, these
ambitions are likely to encounter political problems.
Investment in wind power in India has historically been driven by capital subsidies
and tax incentives, including accelerated depreciation (AD). This policy has drawn
in investors from a wide range of businesses (who also seek on-site power generation
given the unreliability of the Indian grid), and also fostered substantial development
of wind farms by wind-turbine manufacturers themselves in a so-called ‘vertically
integrated’ model (Benecke, 2011; Shrimali, 2014). Interestingly, in terms of
Figure 6.1 above, this policy approach means that the distinction between energy
providers and consumers is again broken down, but unlike as in Germany, only
for industrial and commercial customers, not for domestic customers, and with
quite different political effects. Additional support mechanisms have also been
introduced over the 2000s, including feed-in tariffs at the state level, a ‘generationbased incentive’ offered by the central government and a renewables obligation
on (largely state-owned) electricity companies, but not all of these are functioning
particularly effectively (Shrimali and Tirumalachetty, 2013).
The cost of feed-in tariffs for wind is incurred by state utilities and passed on
to customers. While the relatively small role of wind means that this is not yet a
major problem, in some states, utilities and regulators have begun to worry about
the sustainability of such costs and are pressing for a move to an auctioning policy
(Kanchan, 2013), which has been successful in bringing down generation costs in
solar PV (Deshmukh et al., 2011).
At the same time, support via accelerated depreciation has also produced
negative feedback effects, not so much via electricity consumers as via the federal
budget. In theory, this route leads ultimately to taxpayers, but the nature of Indian
politics means that mechanisms of accountability are limited and the pressure for
94 Matthew Lockwood
to solve the problem of how to manage interests during transformation discussed
above not so much by balancing them but by beginning to transform energy users
into producers and challenging incumbents directly. It was not clear that this was
intended at the start of the policy, but it has evolved in such a way as to produce
this outcome. In the UK, by contrast, policy has benefited incumbent producers,
but the problem of balancing this approach with the interests of users has become
increasingly fraught over time.
India and China
This framework can also be applied in the very different settings of countries like
India and China. These countries are still at a relatively early stage of transformation
in terms of renewable power. For example, despite rapid growth (Lewis, 2011;
Sharma et al., 2012), wind power as the leading technology in both countries still
only provided 2.5 per cent of total electricity generation in India in 2011 and 1.5
per cent in China. Policy feedback effects are likely to be much weaker at this
stage. However, both countries also have ambitious targets for renewable energy,
and the policy feedback approach can help identify how far, and where, these
ambitions are likely to encounter political problems.
Investment in wind power in India has historically been driven by capital subsidies
and tax incentives, including accelerated depreciation (AD). This policy has drawn
in investors from a wide range of businesses (who also seek on-site power generation
given the unreliability of the Indian grid), and also fostered substantial development
of wind farms by wind-turbine manufacturers themselves in a so-called ‘vertically
integrated’ model (Benecke, 2011; Shrimali, 2014). Interestingly, in terms of
Figure 6.1 above, this policy approach means that the distinction between energy
providers and consumers is again broken down, but unlike as in Germany, only
for industrial and commercial customers, not for domestic customers, and with
quite different political effects. Additional support mechanisms have also been
introduced over the 2000s, including feed-in tariffs at the state level, a ‘generationbased incentive’ offered by the central government and a renewables obligation
on (largely state-owned) electricity companies, but not all of these are functioning
particularly effectively (Shrimali and Tirumalachetty, 2013).
The cost of feed-in tariffs for wind is incurred by state utilities and passed on
to customers. While the relatively small role of wind means that this is not yet a
major problem, in some states, utilities and regulators have begun to worry about
the sustainability of such costs and are pressing for a move to an auctioning policy
(Kanchan, 2013), which has been successful in bringing down generation costs in
solar PV (Deshmukh et al., 2011).
At the same time, support via accelerated depreciation has also produced
negative feedback effects, not so much via electricity consumers as via the federal
budget. In theory, this route leads ultimately to taxpayers, but the nature of Indian
politics means that mechanisms of accountability are limited and the pressure for
94 Matthew Lockwood