Wind and solar power were too expensive to build without government subsidies in the past, but with renewable energy much cheaper today, the time for government subsidies may be coming to an end.
In Spain and Italy, solar farms are being built without tax breaks and developers are betting that they can be profitable without them, Bloomberg News reported.
Likewise in China, the Beijing government has plans to stop giving subsidies to new wind farms. In the United States, renewable energy developers are also deciding to sign shorter sales contracts and rely on revenue in the competitive markets, Bloomberg News reported.
Forbes reported in 2019 that a report by the International Renewable Energy Agency found the cost of installation and maintenance of renewables was declining. Renewable energy that did not rely on subsidies was the cheapest source of energy generation, the IRENA report found.
The IRENA report also found that wind and solar power were less expensive than fossil fuels, that new solar and wind farms would be below the operating costs of coal-fired plants and cost forecasts for solar and wind continue to adjust with new information but renewables have beat expectations, Forbes reported.
The American Wind Energy Association estimated in 2018 that the United States produces enough wind energy for 17.5 million homes with the help of federal tax credits. In addition, 5 million homes in the country were powered by solar with a 30% tax credit by the federal government, Columbia University Earth Institute reported.
Texas leads the nation in the generation of wind-powered electricity and nearly three-tenths of the U.S. total in wind power was produced in the state in 2019, according to the U.S. Energy Information Administration.
The EIA indicates that renewables account for almost one-fifth of the net electricity generated in Texas and about one-fifth of the country's renewables. Wind is the leading renewable in Texas and accounts for most of the electricity from renewables in Texas.
Texas was also the sixth largest producer in the country of solar power in 2019, the EIA reported. With costs for solar photovoltaic panels decreasing and also improved transmission access, solar power in the state has increased and capacity in Texas doubled between 2017 and 2019.
Although renewables have shown they are cheaper than fossil fuels, some argue that they are not reliable. As Forbes reported, fossil fuels can ramp up production when peaks in demand are experienced but wind and solar energy cannot. If the sun is not shining and the wind is not blowing, solar and wind cannot be depended upon. Therefore, renewable energy producers most often do not take part in receiving attractive prices for their energy. Sometimes renewable energy producers sell their power for negative prices, Forbes reported.
If subsidies end, renewables could potentially be no longer financially feasible and that could lead to a decline in renewable energy projects, Forbes reported.
