Assessing the Cost-Effectiveness of Renewable Energy Deployment Subsidies: Wind Power in Germany and China

In the last decade, a growing number of countries have employed subsidies to increase the deployment of renewable energy technologies. The subsidies have been credited with a wide range of positive outcomes, and some advocate that more countries around the world should introduce similar schemes. The policies have also attracted critics, who question whether the subsidies are the best way to achieve the stated policy objectives and whether the costs can be justified. This paper explores the cost-effectiveness of subsidies to on-shore wind energy. How much has been spent supporting the industry? What value can be assigned to the benefits that have been achieved?

In considering these questions, this paper focuses on deployment subsidies in two countries: Germany, a developed economy, one of the first to make significant investments in the wind industry; and China, an emerging economy, and a relative late-comer to the wind industry, which has nonetheless acquired large shares of the global market in recent years.

As an exploratory paper, this study is unable to draw confident conclusions about cost-effectiveness. It’s goal is to explore the methods required to assess cost-effectiveness and to estimate the general magnitude and range of benefits in several key areas.