By Gino Bernardi
There is no doubt that government subsidies increase the adoption rate of sustainable construction. Everyone is attracted to “free money.” Some subsidies can significantly affect the financial outlook on projects such as photovoltaic (PV) solar installation. For example, there are some reports of PV solar projects achieving internal rate of returns greater than 20%, which would not have been possible without the subsidy. The most exemplary government subsidy in this regard is Germany’s Feed in Tariff program. Germany’s policies became the status quo of the PV industry. They were so powerful that many financial analysts and economists believe that the financial collapse of the PV manufacturing industry was triggered after Germany began scaling back their Feed in Tariff program in 2010. That is an extreme example of a government subsidy which had such a profound effect on adoption that it created an artificial and unsustainable glut of global PV modules.
From data collected up to 2010, the volume of PV solar capacity in Germany was 17 gigawatts (GW), while Spain’s volume was 3.7 GW (2010 Solar Technologies Market Report). Most surprising, is that Germany’s total level of solar radiation is comparable to that of Alaska. Surely, Germany would not have achieved such a huge level of PV capacity without their popular Feed in Tariff program. All of these facts are important because they clearly demonstrate the power that regulatory action has over adopters of clean technology.
This particular example has shown how incentives do speed up the adoption rate of sustainable technology, but would a slower adoption rate be fast enough without incentives? The answer to that question requires a step back in history at least 10 to 20 years ago. Sustainability is not a new concept. We have had an understanding of sustainability for quite a long time now. It was once referred to as socio-environmental-economic impact. Furthermore, we have been well aware of the global warming trend (a likely derivative of unsustainable construction) for the last 20 years or so. Yet, 10 – 20 years ago solar panels were more like tech toys for scientists, while the US was spending a huge amount of time, money, and focus on securing unsustainable foreign energy. Developing energy “at home” was not on the priority list.
The result of this lack of regulatory incentives demonstrably led to slower adoption of clean technology relative to today’s adoption rate. Whether it be considered too slow is likely still up to debate by critics on both sides. Personally, I find the improved quality of sustainable technology a major improvement over the past alternatives. I would like to see a future of 100% energy independence and until that day happens, the adoption rate will never be fast enough.