LOS CABOS, Mexico--Growth in the renewable energy sector would be greatly boosted by a more stable set of rules governing the subsidy-driven sector, the heads of two major energy companies said in interviews on the sideline of the G20 summit here.
"Business is concerned with the instability of the regulatory framework which is holding back investments," said Ditlev Engel, President and chief executive of Vestas Wind Systems A/S (VWDRY).
Fulvio Conti, CEO of Enel SpA (ENEL.MI), agreed, adding that it was inevitable and right that incentive schemes be phased out as renewable-energy programs increasingly reach grid parity--industry jargon for the ability to produce energy for the same cost as traditional sources.
Incentives helped kickstart innovation in the sector but now "it seems correct for governments, especially in Europe, to reduce incentives in light of technological advancements," Mr Conti said.
The two executives form part of a green-energy task force that helped launch a global initiative announced here Sunday and aimed at addressing the estimated $1 trillion annual shortfall in green infrastructure investment.
Capital is ready to be deployed once stable rules are set, both executives said.
Official measures may vary from country to country according to their specific circumstances, but rules need to be demonstrably lasting, said Mr Engel, who was especially critical of fluctuating U.S. rules, adding that Vestas may shut down a turbine factory in Colorado if Washington does not clearly commit to new incentives for producers of renewable energy, which form a core client base for his company. The U.S. market may shrink significantly in 2013 without action, he added.
Mr Engel also emphasized that to be effective, measures needed to key in on price signals, both as an incentive and a disincentive. "If you want less of something, put a price on it to change behavior," he said.
Clear advance knowledge of prices will unleash investments that are otherwise being held back, he added.
"Money isn't lacking, but what is needed is a stable regulatory framework," Mr Conti said.
Europe's attempts to create a carbon market is one such way, although so far it has failed, not least because prices have collapsed in part due to the global economic crisis, said Mr Conti. "Carbon is something that could give a useful price signal, and we need a market signal," he said.
Among the aims of the Green Growth Action Alliance announced here are the achievement of "robust carbon pricing" as well as an end to inefficient subsidies and other forms of fossil fuel support.
Monitoring governments' attempts to actually implement such measures is critical, Mr Conti noted.
While the head of Vestas was openly frustrated at ambiguous policy stances in the U.S.--"it's a mess," he said--Enel's chief executive warned that the current bonanza of low gas prices thanks to ample exploitation of shale gas resources might not last.
"I would be very prudent before assuming that shale gas will permanently drive down U.S. gas prices," Mr Conti said.
Cheap gas in the U.S. has sparked talk of re-industrialization as lower energy costs are a major boon for manufacturers.
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