‘100% renewables by 2050’ was the driving theme of the Academy REN21 held in Bonn 10-12 November 2014 to celebrate its 10 years driving networks to promote the deployment of renewable energy. Speakers—including Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) and Christine Lins, Executive Secretary of REN21—noted how the amount of renewables now deployed to generate electricity was far in excess of projections made in 2004 when REN21 was set up.  A straw poll of the 180 delegates showed a clear majority who believed that 100% Renewables by 2050 was achievable. This is now the focus of a number of campaigns, for example the “Go 100% Renewables Campaign”. Speakers remarked how quickly this concept and target had moved into the mainstream.

The specifics on how to deliver ever more renewable electricity generation was the focus of the Academy’s sessions.  

The role that fossil fuel subsidies play in constraining renewables deployment, and how these subsidies could be reformed, was the subject of a session held on the first day: “Removing Fossil Fuel Subsidies: Yes, but how?”.  

The keynote presentation of this session was made by the International Renewable Energy Agency (IRENA) and focused on results from the empirical work that IRENA, the Regional Center for Renewable Energy and Energy Efficiency (RCREEE) and IISD’s Global Subsidies Initiative (GSI) had undertaken in five North African countries over the past year. 

The case of Egypt—where the prices of several fossil fuels were raised in summer 2014 and where the government has an ambitious renewables target as it seeks to improve the electricity system—was highlighted.

Peter Wooders, IISD’s Energy Director, welcomed the initiative of REN21 in linking fossil fuel subsidy reform into the debate on renewable deployment, noting how frequently GSI was asked the question: ‘How would fossil fuel subsidy reform affect renewables?’ Drawing on both the growing experience of “how to” reform fossil fuel consumer subsidies and the growing understanding of links with renewable deployment, Mr. Wooders noted: 

1. Impacts of FFSR are generic, known, multi-sectoral and often significant. Negative impacts—on the poor and vulnerable, the freight sector, inflation, public transport and inflation—are often highlighted, but the positive impacts of reform—notably fiscal space for government priorities and enabling clean energy development—must also be part of the narrative.
    
2. FFSR is happening: It’s when and how, not if. Reform in Egypt, India, Indonesia, Jordan and Malaysia are among recent cases.
    
3. The FFSR reform process is known and it is generic. The GSI has outlined detailed technical guidance on the reform process in ‘A Guidebook to Fossil Fuel Subsidy Reform’, organised around three pillars: energy pricing mechanisms; the identification and mitigation of impacts; and building support internally and externally to government. Other organisations note similar pillars. Whilst countries differ considerably across many factors, the issues and options they face in reforming subsidies have a lot in common.  Actual reform never follows all steps and options fully, but the closer it gets to doing so, the better the chance of reform being sustained.
    
4. Using the electricity system as an analytical framework for assessing the impact of fossil fuel subsidy reform on renewables deployment is recommended. IISD has developed the concept of a “Financially Sustainable Electricity System” as a way to analyse the impact of subsidies. Key subsidies are not just the discounted fossil fuels sold to electricity generators, but also the access utilities have to cheap credit and having their debt cancelled, and subsidies to some final consumers of electricity.
    
5. Don’t assume savings from FFSR can, or should, be spent on renewables deployment. There are many calls for public expenditure, and hypothecating between government budgets can be a major constraint. But do call for a level playing field for renewables: the same access to credit and capital as fossil fuel incumbents, an elimination of cheap credit and loss write-offs for these incumbents and the inclusion of external costs in decision-making.

Speakers from Oil Change International, Nigeria’s Federal Ministry for Power and Germany’s GIZ highlighted the scale and issues around subsidies to producers of coal, oil and gas; the challenges of reform in Nigeria, where electricity access is below 50% and options to redistribute wealth are highly constrained; and the need for more collection action and reform coalitions.

As experienced advocates and campaigners, REN21 as a group, and the renewable energy community more generally, could become more involved in FFSR. In this regard, Peter Wooders proposed:

• Help to that there is a better alternative to fossil fuels (for electricity)
  • Using the language and criteria of policy-makers
    • Jobs, exports, security of supply, reliable supply, tax revenues, etc.
• Continue to point out the waste and negative impacts of subsidies
  • Including those that result because of cheap credit, loss write-off, etc.
• Stress that we need to "Get the Prices Right"
  • Step 1: Remove fiscal subsidies
  • Step 2: include externalities through taxation
• Note that a "level playing field" can be created without subsidy reform
  • Shadow (wholesale) pricing; redirection of avoided subsidy benefits; access for auto-generators (including distributed generator

Pradeep Monga, United Nations Industrial Development Organization, Director of Energy and Climate Change, moderated a round-up discussion which pointed towards where further effort should be focused: developing business solutions such that renewables could act as an alternative to diesel generators in poor communities; increasing public information on the scale and impact of fossil fuel subsidies; and showing how policy aims could be met more efficiently and effectively using better-targeted tools than energy pricing.

It is increasingly clear that a decarbonised electricity sector must be one of the first steps taken as we move towards a low carbon economy. A better understanding of the impact and interaction of subsidies in this system—to fossil fuels, to electricity utilities, to renewable energy generation and to electricity consumers—is essential to inform the policies needed to make our electricity systems financially, environmentally and socially sustainable.  

This is the focus of the sustainable power work under the “Electricity” team within IISD’s Energy programme.