Carbon Foot Print CER/VER Going CSR Way?

CER/VER going CSR way?

Is this the new wave? R people around the world and lately have started thinking about their Eco-Karma? Does it make sense to have CER/VER as part of your Corporate Social Responsiblity? Yes it seems thats what the likes of Google, HSBC, owners of SUVs, Tesco people are buying VERs to mitigate impact of their life on Earth.
Green consultants are gung ho about this as this is bringing business to them. But does it really make sense? I would say yes. There is nothing wrong in building green assets with support of CER/VER or any other way. With oil at 110$ per barrel and commodities price at roof top, supporting the cause of green power, renewable power makes good long term business sense. To add to the perspective of green if CER/VER can add financial support to the project than i believe it would be a win win situation.

Article from Economic Times:
THE CHURCH’S seven deadly sins draw the limits of man’s nature but the Vatican’s March 12 announcement — environmental pollution is a sin— seeks to limit man’s relationship with Nature itself. Like all diktats from the heavens, earthly pleasures and weakness of flesh make this one, too, rather difficult to avoid. Though, avoid we must. How exactly do we do that? Control our carbon footprint, that’s how. Many years ago, the Bee Gees asked: "How deep is you love". Today, they would have asked: "How big is your carbon footprint". The bigger your carbon footprint, the closer the rest of us are to damnation. To rescue the souls floundering in the sea of eco-guilt, hundreds of companies and individuals have come together to create a new carbon market that is today worth several hundred million dollars, the modern equivalent of pardons sold by the medieval church. It is a market that allows people to atone for possessing embarrassingly large carbon footprints by financing those who don’t. The market for Voluntary Emissions Reductions (VER) is a place where the eco-guiltridden spend serious cash to reduce pollution though they have no legal compulsion to do so. Since it is prompted by social responsibility rather than compulsory cleaning-up, VER is outside the Kyoto Protocol. Though the voluntary market is currently smaller and less liquid than its Kyoto Protocol-born sibling CDM (Clean Development Mechanism), its potential is significantly larger. "Since growth is led by the private sector and not public policy, it has a strong potential to outstrip the mature market size of the CDM-compliance regime,’’ says Ashutosh Pandey at Emergent Ventures, a consultancy for carbon credits projects and trading. So who buys VERs? Demand comes from three triggers. The most compelling is people’s desire to become ‘carbon neutral’ by offsetting their emissions. From undergrads at Harvard, housewives in Britain, owners of SUVs, to HSBC Bank and Tesco’s, people are buying VERs to mitigate the impact of their lives and business on the planet. Demand is coming from cultural events, sports, airlines, tourism, and even whole countries. Costa Rice has become the first nation to claim it is carbon neutral. "Globally, banks have started to give better lending terms to companies that score high on Corporate Social Responsibility (CSR) and are taking steps to go green and reduce their carbon footprint. This is an example of how companies are being increasingly incentivised to do their bit to combat climate change. These companies, apart from internal abatement, buy VERs to channelise their resources to reduce emissions elsewhere on the globe. The demand from companies in US and Europe for VERs should increase with a clear preference for VERs from renewable energy projects, especially wind and smallscale biomass. Even Indian companies may start buying VERs towards their CSR activities,’’ says Akshat Jaswal, assistant VP in MF Global India, one of the few pure-play brokerages in the global carbon market. Two, VER is the only way Uncle Sam can enter the game. Since the US has not signed the Kyoto Protocol, American companies have yet no use for CDM credits. But compulsory emission binding is inevitable for the world’s richest nation. So American companies are using VERs as a great way to figure out the carbon credits market, plus earn some money while they wait for Kyoto. Trading VERs allows them to understand pricing and hedging tools first-hand. Three, since VERs are likely to appreciate in value, punters are already in on the game. Speculators are building up VER portfolios to stay ahead in the race. You can buy VER either ‘spot’ or ‘forward’. “Spot transactions are carried out for VER which have already been generated, and have completed or are in the process of verification by an independent thirdparty. A spot deal can be arranged based on current prices, as long as VER delivery is expected within three months. Forward transactions are carried out for VERs with a generation schedule over several years, typically up till 2012,’’ says a Mumbai-based banker. For India, the voluntary market has created money from thin air. With one out of every two VERs in the world carrying the made-in-India tag, informal estimates peg our annual supply at around 90 million VERs. "It has a much bigger potential now than even six months ago,’’ says Jotdeep Singh, director and Asia head of renewable energy and carbon credits at Rabo India Finance, which began buying Indian VERs a few months ago. Indian VERs are pouring in from four kinds of projects: those too small to bother with CDM red tape, those held up by CDM red tape, those using technology not recognised by CDM red tape, and lastly, those looking for a quick buck. For companies that missed the CDM bus, VER is a great second chance. The Jaypee Group’s Vishnuprayag power plant over river Alaknanda in Uttrakhand, for instance, began in 1992, much before the Kyoto Protocol. So it does not qualify for CDM. But its contribution to environment protection has been recognised in the voluntary market. In fiscal 2007, JPVL has sold 728,188 VERs on a spot basis to Cargill International SA, for $3.46 million or $4.75 per VER. "By 2012, we expect to earn $40 million from VERs. If VER validity is extended till 2017, Vishnuprayag would earn $72 million. Our group philosophy stands vindicated that one can grow, ensuring care for the environment," says chairman Manoj Gaur. Even bigger suppliers are those large companies that are in the queue for CDM registration. In the interim, they are selling emission reductions as VERs. Once they receive CDM status, these projects will move out of the voluntary market. "At the moment, the focus of Indian emission reduction projects is in obtaining CDM registration, given the price difference between CERs and VERs. The majority of VERs currently come from the operation of projects before they have been registered as CDMs. This tendency to favour CERs is reinforced by the typical requirement that a VER project follows a CDM methodology,’’ says Robert Taylor, owner of Mumbai-based Agrinergy Consultancy. So how does your company start generating VER? The process is similar to that for CDM registration, only simpler, faster, less rigorous and less expensive. "A VER has to be certified by an independent third party against a certain standard. The ground rules are emissions reductions should be real, measurable and in addition to normal business,’’ says Manu Modgill, north India head of operations at TUV Nord, one of the global Big Four carbon market validators. Even so, not all VERs are created equal. Unlike CDM, there are many quality tags. Each standard fetches a different price. Standards perceived to be almost equal to CDM compliance enjoy highest demand because buyers get quality assurance. Gold Standard VERs even get a premium over CDM. Vintage is another issue. "Buyers prefer VERs generated after 2006. Before that no one had fully understood what criteria to look for. Now validators and buyers are very clear,’’ says Modgill. The popularity of each tag depends on the number of buyers backing it. The minimum standard is the Voluntary Carbon Standard, a premium quality label, which means a project has the highest sustainability attributes. Despite certification, buyers complain the market is awash with dodgy VERs. "There are all kinds of voluntary standards floating around. That’s why not all supply would be bought. We are very particular about quality. We run stringent legal checks, only buy Gold Standard VERs or those with significant social value,’’ says Jotdeep Singh. Though caveat emptor is clearly necessary, it’s hard to remain glum when business is exploding. Demand within India is coming from just about every quarter. From socially responsible IT companies to a government proposal for carbon-neutral 2010 Commonwealth Games, suddenly voluntary action is in. Even the rich and famous may walk in, now that being carbon neutral has an oomph factor. "We will soon see high net worth individuals seeking VERs to lower their carbon footprint. Since their emissions are higher, that would be a very good trend,’’ says Pandey. As awareness snowballs, a dedicated supply pipeline is emerging. Right now highest volumes come from wannabe-CDM projects. That could alter. "Just six months ago, VERs were mainly CERs in the making. Now VER-specific projects are coming up. A lot of small-scale wind, solar, biogas, and forestry projects are coming up, with VERs as the vital source of revenue. Foreign buyers are actively seeking Indian village-level community projects,’’ he adds. "We recently had a request from an embassy in Delhi that wanted to take energy initiatives. Such projects can only exist in the voluntary market,’’ says Modgill. With demand-supply well-matched, VER prices are currently stable. But that could change as global demand rapidly accelerates. As long as there are delays in CDM registration, VERs would gain. "I think that there will continue to be a market in this area given the delays in registering projects. More generally I think that companies will look to VERs for some particular projects where the CDM registration risk is high and the project type is poorly understood,’’ says Taylor. With a large number of projects in the pipeline in India, supply is expected to be comfortable. "The number of deals will increase as awareness increases. The risk to future growth could be as more countries start to originate VER and CER projects, they will seek to diversify their portfolio to accommodate these at the expense of credits from ‘older’ markets such as India’s,’’ adds Jaswal. But that’s quite alright because the voluntary market is a vote for the kind of world we want to live in and no one country can bear the ecological burden. As Thoreau asked, "What’s the use of a house if you haven’t got a tolerable planet to put it on?" Even without the Pope’s prodding, it’s time to clean up your eco-karma.

source: Economic times

Clouds on CERs

For the CDM market, the risk of prices crashing in just 60 months from now is increasingly real. There is no accord on the table to set the rules after 2012. The first commitment period of the UN Framework Convention on Climate Change (UNFCCC) Kyoto Protocol, which mandates just over 5% cuts in the greenhouse gas emissions of industrialised nations, expires in 2012. With the EU and USA insisting that large developing nations, such as China and India, agree to mandatory emission reductions, there is every likelihood of a political stand-off between the developed and developing nations that could play havoc with the demand for carbon credits in the EU, its biggest market. "Domestic emissions policy in India is becoming more crucial to the future of the CDM. Europe in its 20:20 vision has expressed a wish that in order to permit CERs into the European emissions trading scheme post 2012 there will have to be an international agreement or that countries supplying CERs will have to have emissions legislation. At the moment this is poorly defined but it does seem to be trend emerging amongst developed countries to ask developing countries to shoulder some of the burden of reducing emissions, whether this emerges in the next commitment period post 2012 or the commitment period thereafter is yet to be determined," says Robert Taylor of Agrinergy Consultancy. With almost $50 million in Indian bank finance, investor capital and corporate profit is riding on carbon credit revenues, companies are understandably worried. "According to EU ETS review at the end of January 2008, the use of CDM and JI credits will be very restrictive unless a there is a new international agreement. In case EU's proposals are actually implemented post 2012, the demand for CERs would reduce drastically. Not many buyers are putting a price on the CERs for phase three,'' says Akshat Jaswal of MF Global India. SBI is reluctant to lend against post-2012 carbon credit receivables. "We are moving very cautiously and giving loans against CER receivables only up to 2012. For post-2012, we only consider loans if the counter-party is the World Bank,'' says a senior official. Though the government has decided not to bend on mandatory emissions, it is confident there may not be any eye-ball-to-eyeball political confrontation after all. Shyam Saran, the PM's special envoy on climate change, believes India is already doing more than its share to reduce emissions. "The government is currently engaged in the formulation of a comprehensive National Plan of Action on Climate Change to deal with this challenge in its different dimensions. This is at the national level," he says. "At the global level, India will continue to participate actively in multilateral negotiations on the subject of climate change in a positive, constructive and forward-looking manner. International negotiations in this regard must be based on the principle of "common but differentiated responsibilities, and respective capabilities" as enshrined in the UN FCCC. In essence, this means the observance of the principle of equity,'' he adds. The EU's hard line is obviously unlikely to frighten India. "We must avoid an NPT-type approach to climate change i.e. that industrialised countries get to keep what they have because they got here first, but the rest must stay at lower levels of development, because they are latecomers. An effective global response cannot be fashioned on this basis," Saran says. Meanwhile, Indian industry has its fingers crossed. "If a project is not viable without post-2012 CERs, it's time to re-look because no one knows how it will play out. We suggest that companies not sell all their post-2012 volumes at one go. They need to hedge their bets,'' says Rabo India Finance's Jotdeep Singh.

Source: ET

Will the US remain US? Or become a neo-USSR? Article from Hindu business line

The title is not to tease the reader. If the ongoing debate initiated by Martin Wolf, associate editor and chief economic commentator in Financial Times and Prof. Nouriel Roubini, professor of economics at New York University, is to be given a title, that could be this.
Wolf, whose Wednesday columns in FT are discussed by fifty most influential economists of the world, is a mainline economic thinker. Roubini, who has held different positions in US government, now occupies important seats in academia and runs Roubini Global Economics [RGE] Monitor, an influential Web site.
In July 2006 itself, Roubini had predicted that US was in recession. But, like others had, Wolf had ignored Roubini for nearly 20 long months. But, as the unfolding events were proving Roubini right, Wolf wrote [FT, February 18, 2008] that Roubini deserved to be taken seriously. March towards disaster
Wolf also held Alan Greenspan, who had dismissed the housing issue “as not a bubble but a froth”, wrong. Wolf pointed out how Roubini has [on February 5, 2008] predicted a 12-step march towards a ‘catastrophic’ financial and economic outcome as a “rising possibility”.
In his column, Wolf recalled Roubini’s 12-step recipe for disaster, including:
Housing recession that wipes out family wealth of $4-6 trillion, forces a million to surrender house keys to lenders, and turns home builders bankrupt;
Home loan losses that exceed the estimated $250-300 billion and, together with consumer loan losses, spread credit crunch across;
Top-rated credit insurers get downgraded, causing a further $150 billion loss;
Commercial property market melts;
A large bank goes bankrupt;
Big losses in leveraged buyouts, with hundreds of billions of dollars of bank funds stuck;
Corporate bond defaults force losses of $250 billions on credit default swap insurers and bankrupt many;
With meltdown of hedge funds delinked from central banks, further collapse of the stocks force huge fall in security prices;
Acute illiquidity dogs financial markets with jump in concern about solvency; and
“A vicious circle” of deep recession makes financial losses “more severe” and “financial losses and meltdown” make the recession “even more severe.”
Roubini estimates $1 trillion loss in the meltdown. “Is this scenario at least plausible?” asks Martin Wolf, and answers, stunningly, “It is”. [This was on February 18. But the loss meter in March projects $3 trillions loss!] If this “nightmarish scenario” lasts for six quarters, Roubini warned on February 5, it would be too late for other nations to devise ‘policies’ to ‘de-couple’ from US.
But can the US Fed head off this danger? Roubini says ‘no’ for many reasons. Two of them are important. One, the Fed can deal with liquidity, but, not solvency, which is the real issue. Two, the transactions-oriented financial system itself is in deep crisis. This second one is critical and needs some explanation. Derivatives in control
The world of finance which Roubini calls as transaction-oriented system looks a bizarre, dollar jungle now. A peep into this mind-boggling labyrinth will unnerve even the most diehard among optimists. The world of finance today is controlled by derivatives. What is a derivative? ’Derivatives are financial Weapons of Mass Destruction [WMD]’, ‘now latent’ but ‘are potentially lethal’. This is not socialist Fidel Castro, but, capitalist Warren Buffet speaking recently (on March 10, 2008). Yet, the most among those who count in the world seem unaware of this WMD. ‘Politicians, senior executives, regulators, even portfolio managers have limited knowledge’ about it, says an expert Web on derivatives. Derivative is a financial instrument whose value is not its own, but derived from something else, on some underlying asset or transaction, such as commodities, equities (stocks) bonds, interest rates, exchange rates, stock market indexes, why, even inflation indexes, index of weather!
The CDOs (collateralised debt obligations), by which the underlying US local subprime loans were palmed off to other continents, was, till the fraud was not out, a reputable credit derivative. So derivative is not only a WMD but also an ICBM, an Inter Continental Ballistic Missile, that hits across continents!
Also, the virtual derivative economy is gradually decoupling itself from the actual in quality as well as size. Hundreds of exotic derivative products have been innovated and innovations by the best minds are continuing. Mind-boggling size
The population of these beastly financial products has grown to gigantic levels that is beyond the competence of any system, mind, or force to deal with. The sheer collective size of these modern financial beasts is terrifying. According to the Bank of International Settlements [BIS], the aggregate derivative positions of banks grew from $100 trillion in 2002 to — believe it — $516 trillions in 2007, that is over 500 per cent in five years!
Yet they do not appear in bank or corporate balance sheets. Some of the vital actuals seem pygmies in comparison to these virtuals. The total derivatives are more than ten times the global GDP [$50 trillion]; some seven times the world’s estimated real estate value [$75 trillions]; more than five times the world’s stock values [$100 trillions]; more than 33 times the US GDP [$15 trillions] or the US money supply [$15 trillion]; 172 times the US federal budget [$3 trillion] — it can go on. The size of the virtual economy is indeed petrifying. Worse, it unpredictably targets, yet accurately eliminates, the distant and the unwary as the CDOs did.
A decade earlier, Long Term Capital Management [LTCM] a hedge fund co-promoted by two Nobel laureates, collapsed. Its loss of $5 billion was peanuts compared to the trillion dollar-plus loss that is forecast now. Yet the LTCM fall nearly snuffed out the global monetary system. The derivative economy was much smaller then. When billions could devastate the world market then, what could trillions not do now? It is so huge now that, no one, not even all governments and central banks in the world put together, can control this huge and growing population of derivatives. This is what Akio Morita, the former Sony Corporation chairman, told the Group-7 leaders as far back as 1993, when the size of the derivative population was far less. With the derivatives growing so malignant, it is not the actual finance which controls its derivative, but, the other way round – the virtual controls the actual. What, if this off-balance-sheet virtual architecture collapses?
It is so fragile that it can. Martin Wolf warns “the connection between housing bubble and the fragility of the financial system has created huge dangers, for the US and for the rest of the world.” If a collapse starts, it is beyond any known power’s power to stop or repair it. The balance sheet of the whole world is too small for it and the actual will too meet the fate of the virtual.
Roubini’s caveat regarding transaction-oriented financial system being in crisis and Warren Buffet’s warning about derivatives as financial WMDs, expose how fragile is today’s virtual financial architecture, which is several times the actual. A way out?
What is the way out? And is there a way out at all? There are ‘ways out’, claims Martin Wolf, but, warns, ‘they are poisonous ones’. Wolf says, “In the last resort governments resolve financial crisis. This is the iron law.” And adds, “The US public sector is coming to the rescue.” Public sector? To the rescue of world’s most efficient financial market? In the freest economy in the world? Yes. And Wolf hopes, “In the end, they will succeed.” This was Wolf on February 20, 2008. The state in US as the answer to the mess created by the free market? Confession indeed from a diehard capitalist!
Some 18 years back, market was touted as the answer to the mess created by the state in USSR. A 360-degree turn now. Read on, it is more interesting. Nationalisation of losses?
In his later article on March 11, 2008, Wolf says, “The government would have to mount a rescue. The most plausible means of doing so would be via nationalisation of all losses.” Nationalisation? And of losses? In free market US, which pontificates on privatisation of public sector and government works the world-over?
But how to nationalise only losses? To keep the ownership with those who lost others’ money? Roubini also says that some market observers are already talking about nationalisation of the US banking system — first covert and then explicit — as the next step to the financial meltdown.
Obviously the US Government is seen as the saviour for the faltering — or better, collapsing? — financial market of the US. So, massive state penetration of Wall Street seems inevitable. And it is already happening. And that will be a topic by itself.
QED: What then is its consequence? If the banking system in US, which holds the Capital of capitalism, is nationalised, what will be left of capitalism in US? Capitalism without Capital ’C’? If US nationalises capital, will US capitalism remain market capitalism or become State Capitalism? Will the US be US then? Or will it become a neo-USSR? No seer is needed to give the answer. It’s obvious.

Why wind needs feed-in tariffs (and why it is not the enemy of nuclear)

An argument often heard against wind is that it costs a lot in public subsidies for a solution that will always have a limited impact (because it still produces only a small fraction of overall needs, and because of its unreliability linked to its intermitten nature). This is an argument worth addressing in detail, especially when it is pointed out, as the graph shows, that wind is already almost competitive with the other main sources of electricity, which suggests that it might not even need the subsidies then (and the increase in commodity prices since that graph was prepared using 2004 data, only reinforces that argument).

We are on the brink of a new energy order. Over the next few decades, our reserves of oil will start to run out and it is imperative that governments in both producing and consuming nations prepare now for that time. We should not cling to crude down to the last drop - we should leave oil before it leaves us. That means new approaches must be found soon.
The above, from an article by Fatih Birol, the increasingly strident chief economist of the International Energy Agency, suggests that we need to develop all non-carbon based energy sources as quickly as we can to avoid the coming energy crunch from oil depletion. He suggests to push nuclear energy, but that may not be enough - and, as I will show below, the best way to push nuclear is also the best way to promote wind power...
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Now, if you look at the graph above, it is very easy to see that the long term cost components of wind power and gas power are very different. Nuclear is quite similar to wind in that respect (more, in fact than the above graph suggests), and coal is quite similar to gas.
Wind turbines, once built, generate almost free electricity - they require only some basic maintenance and servicing. That means that they have a marginal cost of production close to zero (ie each additional kWh of production only requires more wind, but no actual spending); that also means that their main long term cost is the repayment of the initial construction cost, in the form of debt repayment and return on capital for the investors.
This has two simple consequences:
the cost of wind power is essentially set at the time of construction, when the parameters of the financing of the initial investment are agreed, in the form of debt service plus a set return, over an agreed period of time, typically 15-20 years. That cost is fixed and will not vary in accordance with the price at which electricity is actually sold.
once installed, wind power will always be dispatched - with its negligible marginal cost of production, it will always be cheaper than alternatives, and the only reason not to take such free power will be technical constraints from the network (which I'll discuss later). When dispatched, wind power will move the dispatch curve, and ensure that the marginal cost of production required at that point ot satisfy demand will be lower than if wind power were not available - ie wind power displaces the most expensive power source that would have been needed otherwise, typically a gas-fired plant.
The second argument, as the Economist noted, brings savings to all electricity consumers - in fact, in Denmark, such savings are now higher than the subsidy paid to wind power producers, thus creating a net gain for the country. This, in itself, is enough to justify subsidies, given that no other economic actor than the government can create such a gain, as it is diffuse and spread amongst all electricity users; by imposing a feed-in tariff, which similary spreads the extra money paid to wind power producers amongst all electricity users), the costs and benefits appear in the same place, and the gain is obvious and immediate. This is a perfect example of a smart regulation which benefits everyone.
The first consequence noted above is a bit more subtle and needs to be discussed in more detail.
As noted, wind power has high fixed costs, while gas power has low fixed costs but higher variable costs - the cost of procuring fuel. At a time of steadily increasing gas prices, that might seem like an advantage for wind, but, in fact, it is not. The reason for that is that, in today's liberalised markets whereby electricity prices are driven by the marginal cost of production, power prices tend to follow that of gas, since the marginal producer is usually a gas-fired plant. Thus, the variability of gas prices is mirrored in electricity prices, and a gas-fired plant does not really see its competitive position in the market change.
On the other hand, a wind farm, with its fixed costs, makes a lot of money when gas prices (and thus electricity prices) are high, but stands to lose money should at any point electricity prices come down again. The short term profitability of wind farms is driven by factors totally outside of their control (gas prices, which are themselves driven, in the medium term, by oil prices). Should that short term profitability be negative for too long, that can spell trouble for the investment (ie bank loans might be in default - even if temporarily - and the investors then stand to lose the project to the banks. And if that's too likely to happen, banks simply won't lend, because any default (even a temporary one) causes losses and headaches. Essentially, investors and banks must bet that gas prices will stay high enough every single one of the next 15 years for the project to avoid trouble.
To express things differently, the competitiveness of a wind farm - decided at the time of investment - depends on how low the gas prices might go over the next 15 years, whereas the competitiveness of a gas-fired plant depends mostly on the existing power plants - to know the plant's position on the dispatch curve, and thus its likely use. To a much lesser extent, the relative variations of gas and coal prices will also play a role, but this has a second-order impact on revenues.
In short, a gas-fired plant presents a much lower risk profile at the time of the investment, in the sense that the risk of catastrophic loss (from long term price movements) is much less, and that the somewhat higher short term price risk is easier to manage (and financial markets are happy to provide their services there).
That different risk profile is, of course, the reason why wind power needs to be supported in some way by public authorities: markets, left to themselves, will invest in the very technologies (gas and coal) that are the source of all our worries, founded or nor, on the energy front: climate change (coming from carbon emissions), and security of supply (coming from the likely depletion of resources in the long term and the perceived unreliability of suppliers like Russia in the short term).
And the public authority has an actual incentive to encourage wind farms: the long term fixed nature of its price structure presents an unsurmountable risk for the private sector, but it does embed very real value for any entity able to bet on the very long term: a guarantee that prices will be no higher than that fixed cost, whatever the price of oil, in 20 years' time. The markets, except for very specific cases (energy intensive industrialists that know their energy needs in the long term, are not necessarily concerned about temporary interruptions and value long term average prices rather than short term ones), are currently unable to give a value to what is effectively a very long term option on electricity prices - but that value is there.
We know we'll still need electricity in the next 20 years; public policy that works to provide a cap to how high the price of that electricity can go sounds like smart policy - and smart politics.
In fact, on the basis of the value of that option, it can be argued that feed-in tariffs, which provide a stable, guaranteed price to wind power and thus allow the relevant investment to be made with the high-probability perspective of a decent return , are not a subsidy, but a fair transaction, whereby the public authority purchases the guarantee of capped prices in the future in exchange for somewhat higher prices today. The exemple of Denmark quoted above, and the current trends for oil prices, suggest that this is a transaction likely to be highly profitable in the long run, in fact, and thus not at all a subsidy.
Tax credits, as provided in the USA, are a similarly effective mechanism, as they provide a guaranteed minimum income to wind farms and thus ensure that the minimum long term power price threshhold required to make the investment in a wind farm a sensible one is much lower than it would otherwise be, and thus that such investments can be made today - and indeed they are, as the current boom in windpower in the US shows. And the cost-benefit analysis is likely to be similar once wind reaches a sufficient penetration in the market.
A third mechanism that would work as well is NOT the green certificate market regulations used in a few countries (the UK, Australia, Italy), but would rather consist in authorising public authorities to provide financing to the power sector. Given that the main cost of a wind turbine is the fixed financing cost, if you loser the aplicable interest rate and/or required return on capital, you also lower the long term cost of production. Public authorities can borrow money a lot more cheaply, and over much longer periods, than private sector entities, so the cost difference can be quite significant - it can halve the cost for nuclear plant, for instance. And they would not even need to actually provide funds, as this could take the form of payment guarantees. Thus, the public entity would bear that risk of periods of low power prices in exchange, once again, for having a growing portion of power generation coming from carbon-free, capped-cost sources. and the beauty of such guarantees is that they can be provided to all power sources (ie including gas and coal fired plants) in order to avoid the accusation of distorting competition: the cost impact is a lot bigger on wind or nuclear than on gas or coal, and thus the investment decisions will be correspondingly influenced. Charging a flat fee for such a guarantee would make the mechanism transparent and "fair."
The lesson from all this is that wind power does not need subsidies if you make it possible to take into account long term perspectives rather than short term risks. And the same argument applies to nuclear power, so the two technologies are perfectly aligned in that respect - one could even argue that mechanisms that allow to take into account the long term cost/benefit analysis would boost nuclear even more, given that nuclear power plants present the additional risk, from a private investor's perspective, that it is a huge discrete investment, ie it is hard ot invest a small amount in a nuclear plant, you need to sink at least a couple billion euros. Wind farms can at least come in chunks of a few million a piece but, with nuclear, you need to bet big each time, and very few private sector players can afford to concentrate their risks like this.
Of course, this discussion has not even discussed the fact that most existing technologies other than wind are heavily subsidized, either directly, or because they do not have to pay for the externalities they cause. The most obvious example being the lack of price paid, until emissions trading actually comes into force, for the carbon dioxide emissions from gas- or coal-fired plants, or the direct subsidies paid to coal mining in many countries.

At this stage, nuclear advocates might agree with my points and conclude that we need to focus on building nuclear plants, given that wind, being unreliable and small-scale, can never "do the job."
I'd argue that, while personally favorable to nuclear, it's not the easiest solution to deploy in many countries. Given that the State will always bear the ultimate risk for very long term waste management, for catastrophic accident insurance (both impossible to price by the private sector) and for overall safety and security regulation, and that price "support" as proposed above further implicates public authorities, my position is that nuclear power should be run by publicly-owned entities - the EDF model. Under such a model, nuclear can indeed provide a large chunk of our electricity needs.
But even in countries where this model can be applied, there should be no limitation to the development of wind power, and no need for nuclear advocates to demean or mock wind power. Given that it is essentially the same regulatory framework that favors both technologies (with specific regulatory requirements for waste on the one side, and for network reinforcement on the other), they are objective allies in the public debate on energy.

source: http://europe.theoildrum.com/node/3688