[teamonkey]

Yes, but here’s the thing: you don’t have a monopoly over your potato farming method. Lots of new farms are built, and the more that do, the more the average price of a potato drops. Your expected return starts to drop. Yours - and everyone else’s - profit margins get squeezed.

Investors begin to refuse to build new potato farms because a return on their investment gets worse whenever anyone decides to build a new farm.

But the people need potatoes and more potato farms! The government issues an incentive scheme to guarantee a minimum price for each potato sold. Potential farm owners bid against each other for the lowest price, but it means they can build a farm and expect to break even.

[rlpb]

> Investors begin to refuse to build new potato farms because a return on their investment gets worse whenever anyone decides to build a new farm.

If they all refuse, then they're leaving money on the table. One investor could invest in 10% production only, and that would be very lucrative. It would be exactly my low cost to produce potato scenario.

In practice, they don't all refuse, or all invest. The market finds a balance. In time, producers switch to the new method, because anybody who doesn't leaves an opportunity for someone else to take their business and make more money.

This takes time, though. If we want things to go quicker, then we need to guarantee return on investment for longer, which is exactly what the government does by guaranteeing prices to renewable energy producers.

[teamonkey]

> This takes time, though. If we want things to go quicker, then we need to guarantee return on investment for longer, which is exactly what the government does by guaranteeing prices to renewable energy producers.

Yes exactly. The incentives to renewables producers exist to ensure accelerated growth. This may mean we are paying more for renewables in the short term (though no more than fossil fuels) but the investment should pay dividends in future.