Here's my policy suggestion on how to set up the fee structure for electricity usage, to promote clean energy (ie non polluting, reduced or nil CO2 emissions).
To start with, let's make some some basic assumptions. If you don't agree with them, so be it. I think they represent mainstream public opinion.
I think most people agree that non CCS (Carbon Capture and Storage) coal plants are not great for the environment. However they continue into the 21st century due to their obvious advantages of low cost, reliable output and long term plentiful supply of fuel. Therefore by the same token, most people know that in the short term we can't do without them.
On the other hand, with the possible exception of nuclear, clean energy sources just aren't capable of competing on all fronts with coal. However there's no doubt that we have to have it to ensure our supply of electrical energy if we either want to start shutting down coal plants or grow our energy supply further.
Therefore we need some way of promoting clean energy that ensures the best technology is given the best chance regardless of what it looks like.
So here's my idea:
First, divide all electricity sources into two categories. Let's call them Old Energy and New Energy. Old Energy would include non CCS coal plants and any other energy source we really don't like. New Energy would include everything else. Natural Gas plants could fall into either category, or you could make a third just for it, but I think that would be too complicated.
Every single household and every business, would have two parts to their electricity bill, a separate charge for Old Energy and for New Energy. At any one time, only a certain number of kilowatts can be charged to the Old Energy portion of the account, and anything else must be charged to New Energy. The maximum number of Old Energy kilowatts at any time during the day may be fixed per household, or perhaps legislation would have to be introduced so that larger households have a higher allowance.
The purpose of this would be to limit the amount of Old Energy that may be produced while allowing low income households to access Old Energy at a reasonable price. Meanwhile those households that wish to pay more could do so, and shouldn't be made to feel guilty for being energy hogs since they are not competing with the poor for their supply of New Energy and the energy is clean isn't it? The smart metering I talked about in my previous post would ensure that no-one gets nasty shocks when they get their end of the month/quarter bill, regardless of their income or energy expenses.
Under this scheme, all subsidies for New Energy sources would be eliminated and the market would decide itself the value of New Energy sources that might vary depending on the time of day, or even at random, as might be for some wind energy plants.
I can see at least one major weakness in this idea (I wonder what the others are!), which is how to allocate Old Energy amongst large and energy intensive businesses, that require reliable baseload power at a predicable cost. Perhaps after the initial allowance of Old Energy has been divvied up amongst households and small businesses, businesses could bid for the rest, in a similar manner to carbon credits. It's a bit complicated but it might just work.
Another lesser weakness, in my opinion, is that there may not be much scope for reducing the supply of Old Energy over time, without hurting low income earners. It is hoped that over time, as the economies of scale for generating New Energy start to kick in, the cost difference will decrease, but there is no guarantee that this will happen. Depending on how 'compassionate' your government likes to be, some New Energy sources with baseload capability could be subsidized and put into the Old Energy category just to keep everyone happy.