Solar Power: Germany is a global leader. (Waltraud Grubitzsch/EPA)
Germany’s key to green energy
Despite its damp climate, the country has become the global leader in wind and solar power through a pioneering law. Now, Congress is weighing a similar bill.
By Mariah Blake | Correspondent of The Christian Science Monitor/ August 20, 2008 edition
Correspondent Mariah Blake talks about a German law that enables anyone with a rooftop solar panel to sell energy at a healthy profit.
Correspondent Mariah Blake
Freiburg, Germany
While other nations hunt for ways to wean themselves from fossil fuels, Germany is in the throes of a green revolution that has made it the global leader in solar- and wind-power generation.
The reason? A pioneering law that requires utilities to buy electricity from renewable sources at premium rates. This means anyone with a rooftop solar generator or a small water turbine can sell the energy they produce at a healthy profit.
“It puts power in the hands of the people,” says Stefan Schurig, energy director for the World Future Council, which promotes sustainability.
Following Germany’s lead, more than three dozen nations, from Spain to Indonesia, have adopted some variation of the policy, known as a feed-in tariff. In the US, six states and Congress are weighing similar bills. “We’ve had two great exports from Germany: sauerkraut and the feed-in tariff,” says Jay Inslee (D) of Washington, one of the federal bill’s sponsors. “Germany has pole-vaulted over other countries when it comes to clean-energy technology, and that’s gotten people’s attention.”
The goal behind feed-in tariffs is to foster a growing network of small and medium-size energy producers. In Germany, at least a dozen communities now produce much or all of their own energy, using everything from ultrathin photovoltaic panels to cow manure. A few have gone even further. Residents of Dardesheim, a hamlet in the hardscrabble east, now own enough windmills to power 10,000-plus homes.
Supporters of the policy argue that such a grass-roots movement is the only way renewable energy will ever be deployed on a large scale. “The big energy companies have too many vested interests in sticking with conventional energy sources,” explains Hermann Scheer, a veteran parliamentarian who pioneered Germany’s feed-in tariff. “They will never be the driving force behind renewables.” (See the Monitor’s Q&A with Mr. Scheer.)
In many cases, market rates for renewables are too low to justify investing in equipment, which has stymied development. Advocates argue that requiring utilities to offer premium rates encourages renewable energy production and investment. This creates new jobs, speeds up development, and eventually drives down costs – while fossil fuel prices are likely to keep rising.
Not just for idealists anymore
Since 2004, employment in Germany’s green-energy sector has climbed from 160,000 to nearly 300,000. According to a study by Roland Berger, a research and consulting firm, green technology is expected to pass the auto and electrical engineering industries to become the nation’s No. 1 employer by 2010.
What’s more, since Germany adopted its first comprehensive feed-in tariff law in 2000, renewable energy has grown from 6 percent to 14 percent of the market, a milestone it didn’t aim to reach until 2010. Despite its cloudy climate, the nation now has more than half the world’s solar-power generating capacity, and is the leading destination for green technology investment with $14 billion invested last year alone.
These gains are funded by electricity consumers, who pay about $4 a month extra per household. Much of the profit also goes to ordinary citizens. Among them is architect Rolf Disch, whose home looks like an upside-down rocket with a giant, rotating solar panel on top. The building generates 9,000 kilowatt hours of electricity a year, five times more than it uses. By feeding this energy into the grid, he earns more than $3,000 a year. [Editor’s note: The original version overstated the amount of money Mr. Disch earns by selling his surplus electricity.]
“It used to be only idealists were interested in solar,” says Mr. Disch, a professed idealist who has designed solar cars and gas stations. “But now there’s money to be made from the sun.”
US Congress considering a similar law
Like its German counterpart, the feed-in tariff bill before the US House, known as the Renewable Energy Jobs and Security Act, would guarantee renewable-energy producers long-term contracts at above-market rates. To encourage small investment, it would also set a 20 megawatt cap – roughly the quantity produced by 10 wind turbines.
Hawaii, Rhode Island, Michigan, Illinois, and Minnesota are weighing similar bills. California, which introduced a feed-in tariff in 2006, is considering retooling its policy so that rates vary by technology and are tied to cost of production – a system favored by renewable-energy advocates because it rewards investment in more costly sources, such as solar power.
These proposals have drawn criticism from the electricity industry, which argues they will make the grid more difficult to manage and drive up energy bills. “If you force utilities to pay heavily subsidized, above-market rates, somebody will have to pick up the tab, and it’s going to be customers,” says spokesman Ed Legge of the Washington-based Edison Electric Institute, an association of electric companies whose members serve 70 percent of the US market.
But the policy enjoys wide support among environmental groups. Comparative studies by the European Union and independent scientists show feed-in tariffs deliver better results at a lower cost than other tools, like renewable-energy quotas. But the biggest selling point for backers is that they rally capital.
“This is the sharpest tool in the toolbox because it’s the most effective in driving investment into renewable energy,” says Representative Inslee. “It also promises the tremendous side effect of making America competitive in green technology. But we have to act soon, because there isn’t much time to lose.”
How Germany became so green
The nation has pioneered feed-in tariffs, an incentive program to increase renewable energy output. It requires electric utilities to:
• Give green energy producers access to the grid
• Give them long-term contracts (usually 15-20 years) at above-market rates
• Buy all electricity generated by qualified renewable sources
Whereas other policies, such as tax credits, favor big companies who can afford large upfront costs, feed-in tariffs encourage small, local production. Comparative studies have found feed-in tariffs are most effective in spurring renewable energy generation.
• Next: How the humble farming village of Freiamt has not only achieved energy independence, but now produces 17 percent more energy than it uses.
( More stories )
Comments
2. Jeanne | 08.20.08
Thank you for this informative article. I hope the idea of feed in tariffs gets wide exposure. The time may be ripe for the idea of micro energy production.
Would love to know if there are pilot projects that the average person could see in different areas of the US.
Jeanne
3. Michael | 08.20.08
HELP! We are paying almost 50¢ a kW here in the US Virgin Islands, where sun and wind abound. All our electric power is generated by diesel oil. We are having a very, very difficult time convincing the powers that be to move immediately to renewable sources, including OTEC, as we have very cold water close to shore.
If there’s anyone out there who can make the argument for renewable energy in a way that will trump the tendency to always build something “new, shiny, and huge” rather than the distributed, small-scale solution Germany has implemented, please contact me at minoradjustments@gmail.com.
4. mark b | 08.20.08
It you do the math on the farmer selling 9000 KW a year for $3000×12 it works out to about 26 cents a KW. Factor in transmission costs of maintaining an overly complex grid and the germans are probably paying more than 50 cents a KW.
Here is the US the average cost is about 9 cents. Production costs are about 1.7 cents. Wind and Solar are so great they can only exists by huge subsidies.
5. Hanover33 | 08.21.08
The authors don’t do a good job of researching this article, Germany is trying hard to reduce its subsidies due to the high costs and a backlash that the expected reduction in costs of alternative sources has not occurred - the subsidies do not provide the incentive to reduce costs. The theory is, give the industry a leg up so that investment is made in new technology and prices decline. So far, the prices have not declined and the government is subsidizing a non-economical solution at a high cost. Remember ethanol subsidies in the US? Why do you think solar is being used in a poor location for solar energy in Germany? The government (i.e. taxpayers) bear the cost (and then some) of the inefficiencies.
I guess that might be OK if you value the environment very highly and are willing to pay the costs, but long term it is a distortion of the market that will favor inefficient solutions vs. market-based solutions that are viable long term. If you keep energy prices competitive, and perhaps tax carbon usage to account for the cost of pollution for example, the costs may then provide an incentive (but not a subsidy) for people to figure out alternatives that are more cost effective than carbon. Figure out means invest in new technology to make the solutions cost effective. Check out the venture capital investments (and big company investments) in alternatives to corn-based ethanol such as Coskata in the US for a good example of innovation to get costs low.
In the US where I live in Massachusetts, I can buy clean hydro and wind energy already from my utility by paying extra ‘green up’ charges on my electric bill, which I do. This costs me between $ 50 - 100 USD / month. I do this because I’m willing to pay to ‘go green’, but that is my choice vs. the government forcing me to pay extra for inefficient electricity.
Nuclear is even more cost effective over the long run than natural gas and oil - and is clean relative to carbon sources. Why not extend Nuclear vs. subsidize inefficient sources putting cost pressure on lower income families or increasing taxes on ‘those who can pay’ for everyone else?
Here is an article referencing the decrease in subsidies and Germany’s attempt to cut them (http://www.greentechmedia.com/articles/big-renewable-energy-subsidies-backfire-1059.html) maybe the authors should look deeper into this subject before publishing a puff piece on subsidies.
Germany is a good example of the dangers of success.
The country offered a feed-in tariff that paid a higher rate for the generation of renewables, including solar power, making it cheaper to own solar power than to buy conventional electricity.
The high cost to the government led to a backlash, with politicians questioning why the solar industry still needed such high subsidies, and the tariff has declined faster than expected - although not as fast as many had feared (see Solar Prices Set in Germany).
“Germany really only needed to get [solar] to price parity, and it went over that,” Pernick said. “The incentive has got to be there for the solar manufacturers and the value chain to drive down pricing. If a subsidy is too large, it has a reverse effect.”
6. Tyberius | 08.21.08
Look at all of the independant infrastructure that is now being put in place. If there are oil/coal/natural gas reductions in supply, impairment of hydro electric dams, or technical/political breakdowns with nuclear power, there will be solar/wind, albiet perhaps a smll amount of backup that could be directed to medical/governmental agencies in priority during times of emergency.
Just as with garbage disposal, counrties such as Canada, seem very backwards, in comparison with Europe, especially Germany.
Does anyone know if Canada has similar programs in place or at least anticipated?
7. Hans G. Ehrbar | 08.21.08
Unfortunately you are not explaining the feed-in tariffs very well.
All you say is that utilities have to pay above market rates. You do
not explain that these rates are determined in such a way that the
early investors in renewable energy can make a profit. I.e., it is
determined by the market. And most importantly, installations next
year lock in a lower long term rate than installations this year
(”degression”). This fosters innovation in the equipment industry and
pushes the learning curve in renewable energy forward. Many
publications estimate that the overall cost of renewable energy is
lower in countries with feed-in tariffs than in countries with
renewable portfolio standards or similar.
Therefore one must turn the objection of the electricity companies
around. The failure to implement feed-in tariffs is the more
expensive option, “somebody will have to pick up the tab, and it’s
going to be customers,” but the coal operators, and the banks
charging high interest for “risky” loans, are the winners.
8. Katharina Moeller | 08.22.08
@Hanover33: thanks for nuancing.
However, Feed-in-tariffs in Germany cost the average household only 2 Euros a month. By the end of 2006, Germany had about 250 times more installed solar capacity than Minnesota, one of the sunniest States of the US.
(According to http://www.newrules.org)As a German, I feel that these are appropriate numbers.
I applaud your action to buy green electricity - but how many Americans are willing or able to pay an extra 50-100 dollars a month? Distributing the costs to a larger mass of people while yielding more effective results, like in Germany, seems like the better solution, doesn’t it?
9. Marymomgret | 08.28.08
Hannover33’s comment about nuclear power plants prompted me to respond.
The enthusiasm for Nuclear solutions never include a discussion about the difficulties of disposing of low level radioactive waste, the catastrophic disaster potential of nuclear plants, or the actual cost to taxpayers of subsidies and incentives.
The current monopolies enjoyed by investor owned utilities often result in widespread hardship for hundreds of thousands of consumers when weather events interrupt energy distribution.
I would love to see millions of solar roofs in this country. Long term, I don’t expect that the owners will continue to generate profits from their excess production. I do believe that short term, the potential for profits will be an incentive for encouraging the transition.
The manufacture,installation, and maintenance of individual energy systems will create millions of new jobs.
10. John | 12.13.08
The Future of Alternative Energies and the future of America
I was driving home from work last week and noticed the latest gas price of $ 1.75, seems like we were just recently at over $ 4 per gallon. Oil is now $ 45 per barrel, commodities like steel are down, our US national debt is skyrocketing, and all the once high flying Solar energy stocks and green eco funds have plummeted along with the global markets. They say we are in a severe recession, that demand will fall for energy and that gas could fall to $ 1 per gallon as unemployment hits multi-decade highs. Seems like we were just being shocked by $ 145 per barrel oil and record profits by oil companies, it makes me as an American citizen really feel manipulated and that our government hasn’t had a plan for securing our country’s future. How did we get into this financial crisis? Who caused this collapse? Seems to me terrorists couldn’t have implemented a plan this exacting, yet we hear that this was triggered by only four percent of the outstanding US home loans being in question. Now all conversation turns to how many billions of US tax payer dollars will be reactively given to faltering industries to mitigate loss of jobs in America. These are global corporations asking for US bailouts. Will unsecured pension plans, hurt by the recent stock market collapse, be next to default? Where will jobs come from as we rise out of this global recession? Green technology jobs and projects may be now questionable due to falling energy prices. Will America be the country and we be the innovators of this Intellectual property? Can the hundreds of alternative energy startups get the financing they will need to stay alive through this recession and to successfully commercialize their products?
Barack Obama will take office soon and has stated his administration will invest $ 150B over ten years to catalyze private efforts to build a clean energy future. Let’s hope he isn’t an advocate of ‘clean coal’, which many doubt exists or today’s Ethanol as his green alternatives. Will Q Microbes hold promise for Ethanol production which is in it’s early stages of research at UMASS Amherst? My hope is that he backs strong Solar, Wind, and Natural Gas based ‘distributed hydrogen generation’ projects, the building of Hydrogen distribution fueling stations, and Fuel Cell use in his ten year plan. Just to think, we could have used $ 25B to setup 20,000 hydrogen fueling stations in the US, instead, hundreds of billions will be wasted on reactive spending rather than implementing long-term energy solutions. Will our new president have the discipline and vision to invest in these energies and infrastructures, to create and capture these jobs, or will he drop these pre-presidential energy plan headlines until another day when prices start rising again? Where will all these billions come from, between the Iraq spending, financial crisis bailouts, and proposed alternative energy initiative investments? The more we print new money, the more we risk the value of the US dollar falling to all time lows and the American family’s wealth further disappearing. As we recover from this financial crisis and recession, will India and China’s thirst for oil reinitiate the high demand and prices as new cities continue to be developed in these and other emerging countries?
As a US citizen and investor interested in the advancement of alternative energies, in America’s future, and in managing these global wealth shifting trends, I sincerely hope we aggressively drive energy science, provide research and development dollars to these early startups, and reduce our dependency on dirty foreign oil and fossil fuels. We need a ‘Hydrogen Manhattan Project’ that integrates Solar, Wind and Natural Gas as a source of power to generate distributed onsite hydrogen coupled with fuel cell use. Focused research and development dollars solve problems through science advancements. Innovation and diversification into green energy is the answer for America and the world. For more information visit and bookmark my website; http://www.go-h2.net
11. hamood alhabsi | 12.15.08
i would like to promote the technology to my country OMAN,please contact me on my email address hamood.alhabsi@sspetroleum.com
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1. Daba Khelbi | 08.20.08
I believe, these games we have been through and those have made us educated enough to understand them now. Our corporate/political games have burnt us out. What ever made sense we tried, oil companies brought the ficticious gas prices down to ruin them in the past and they will do it again. We are a slave or victim of so called ‘Democracy’ peoples right anyway.