Renewable Subsidies ‘Unaffordable’ at $725 Billion, Bank Says

The cost of subsidizing renewables in Europe’s five largest power markets is becoming unaffordable for consumers and utilities who will share the 570 billion-euro ($725 billion) bill, according to Credit Suisse Group AG. (CSGN)

Utilities in Germany, France, the U.K., Spain and Italy will incur 148 billion euros of the total cost of subsidies granted so far, with EON AG and RWE AG (RWE) the most exposed, the bank said today in a report. Consumers are likely to bear the remaining 422 billion euros in costs, based on current values.

European nations seeking to meet climate change targets have adopted subsidy mechanisms such as feed-in tariffs that reward generators of renewable power. Leaders from the U.K. to Germany are debating the costs that burden imposes on consumers as they pursue goals to lower fossil fuel emissions.

Governments could shift more of the burden from consumers to utilities and independent power producers if economic growth remains sluggish, the Zurich-based bank said. The change could come in the form of taxes on renewable energy generation.

“Renewables were always going to be a cost to consumers, but the cost has increased at a time of fiscal austerity and they are expensive versus fossil fuel prices,” the bank said.

The annual cost of the subsidies in the five markets is 16 percent of the average electricity bill, Credit Suisse said. While measures such as moratoriums and cuts in tariffs have been taken to tackle the cost, those steps “are not large in relation to the cost.”

The five top markets on average are spending 32 billion euros a year in subsidies. The 570 billion-euro figure reflects the net present value of renewable subsidies for existing and some new-build assets. It equates to about 6 percent of gross domestic product and 7 percent of government debt, according to Credit Suisse.

To contact the reporters on this story: Sally Bakewell in London at sbakewell1@bloomberg.net; Marc Roca in London at mroca6@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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