Subsidies Examples: Energy Supply Producer Subsidies

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Government support of research and development programs stimulates the development and deployment of new energy conversion technologies and creates new markets for those technologies. Subsidies are most effective where there is a demonstrated need for technological development. Subsidies to renewable energy technologies that have developed because of technology push, without sufficient consideration of whether it satisfies a user need, are not as effective as subsidies to new technologies and energy suppliers that have demonstrated an ability to meet existing market needs.

 

A subsidy is often an effective policy to overcome market barriers to the adoption of new forms of energy production. Where there is a lack of industry investment, direct government support can speed the deployment of new technologies. Government investment in new technologies can encourage investment in the private sector. Effective subsidies create a market expansion for new technologies, which leads to further private investment in research, development, and deployment.