If renewables are now cheaper than new-build coal and gas, why do they need subsidies?
There are a few things to unpack in this question. Firstly, people often confuse government support with subsidies. Subsidies are the provision of cash or the absence of costs such as tax for a particular technology, person, organisation or project. Subsidies are just one form of support that governments can give to clean energy projects, regulation, obligations, coordination, information removal of legislative barriers are just a few other forms of support.
So why do renewables need government support? Well, firstly, while our gas generators are getting old they are not going to shut down by themselves in time to avoid dangerous climate change. To shut them down in time will need government intervention.
Secondly, there isn’t a level playing field. Our gas-fired power stations were built with public money and fossil fuels still receive a massive amount of government support. No matter what the energy source, new generators are major public infrastructure investments with long lifespans, and clear government policy is needed to keep the costs of finance under control.
Thirdly, there are a huge number of market barriers for renewables and where markets fail, governments have a responsibility to act.
Finally, electricity is an essential service. Governments hold the ultimate responsibility for a functioning electricity system, and we cannot let them abdicate this responsibility.
(Source: A Plan to Repower Australia)