Subsidies to green energy production: a mechanism to reduce peak energy prices

The energy and electricity price has increased immensely during recent past. Invariably the climate sceptics, deniers or “realists” have said that it is because overambitious climate goals, we should not aim at reducing the use of fossil fuels. Well, we have not so far succeeded in reducing fossil fuel use – 2021 was the year with the highest combined coal, natural gas and oil use. The increased, not the decreased consumption of fossil fuels is the major reason for increased energy price. Because the coronavirus pandemic decreased the fossil fuel consumption in 2020, their production and storage were decreased in 2021. As the economic activity increased markedly in 2021, fossil fuel supply could not fulfil the demand, and their price increased markedly, driving also the price of electricity up. So the increased cost of electricity is not caused by increased shift away from fossil fuels, but fossil fuel producers producing less when the consumption was increasing.

Thus, increased green energy production is, in fact, reducing the price increase. Also, subsidies to wind and solar energy production do not increase the energy price, rather the opposite. In many cases, the wind and solar energy producers are given subsidies, if the energy price is below an agreed level. If it goes above the agreed sum, a part of the profit is paid back. This sum could then be used to offset the increasing cost to the consumer. Therefore, building more wind mills would dampen the energy price increases, which are largely caused by imbalance between fossil fuel production and consumption.