Part 1: Introduction & Overview

This report identifies and describes policies used by a variety of nations to encourage the development of renewable energy. Most of the information was collected through interviews and site visits in Denmark, Germany, Japan, the Netherlands, and the United Kingdom between December 1997 and December 1998.

Because the United States was the first nation to enact modern environmental laws such as the Clean Air and Clean Water Acts, as well as the leading developer of a wide range of energy and environmental technologies, many Americans believe that the nation remains the preeminent leader in these fields. Indeed, during the 1980s and early 1990s, the United States developed a non-hydro renewable generation capacity that was larger than the rest of the world combined. However, during the last several years, the United States has lost the lead in renewable generation capacity. This report describes a series of national policies that other nations are using to grow their renewables base. Governments are consciously helping to pull wind, solar, biomass, and other forms of renewable energy into the marketplace.

Renewable Energy in Europe

American firms and individuals initially developed many of the renewable energy technologies that currently enjoy commercial viability or will soon reach that point, but Europeans have now seized the lead in deploying them. This turn of events has several explanations as summarized in a 1996 European Commission Green Paper:

1. Renewables go hand in hand with the objective of protecting the environment, and in particular help reduce [carbon dioxide] and other emissions;

2. Being indigenous sources renewables contribute to reducing dependency of energy imports;

3. Renewables are advanced technologies, which can play a role in revitalizing sectors of European industry and contribute to competitiveness;

4. They generate employment, in particular in [small and medium-sized enterprises];

5. They are an important aspect of regional development and are well-suited to decentralized energy systems;

6. Their development is favored by the general public, in particular for environmental reasons;

7. They contribute to solving energy and environmental problems in developing countries, and at the same time provide export opportunities for European industry, which enjoys world leadership of renewable energy technologies.³

Governments in Europe have adopted a variety of policies to encourage the development of renewable energy. The principal measures are financial, and include the following:

• Fossil fuel taxes: these increase the costs of energy from nonrenewable resources.⁴

• Renewable energy subsidies: these lower the costs of energy from renewable resources by, for example, providing investment subsidies or fiscal benefits.

• Mandated purchases: these either compel purchases of renewable energy or mandate higher payments for it by, for example, setting the sales price at a minimum percentage of the residential electricity rate.
  

Most European countries use a mix of these financial measures to create a market for renewable energy, with the measures varying from nation to nation. Generally speaking, however, the Scandinavian countries rely on high taxes on fossil fuels, accompanied by tax exemptions for renewable energy. In the United Kingdom, a market-based system called the Non-Fossil Fuel Obligation (NFFO) incorporates a tax on electricity to fund a subsidy for renewables. Germany uses a combination of investment subsidies, high payments for renewables, and cheap loans.

Financial measures, however, are by no means the only instruments through which renewable energy is encouraged. Governments also have established programs to map available resources, develop and incrementally improve technologies, and better the public perception of renewables. Substantial sums are devoted to R&D programs and other measures to coax the renewables industry toward commercial success.

The Importance of Environmental Awareness in Europe

Environmental awareness is very high in much of Europe, particularly in the middle and northern European nations—from Germany, Switzerland, and Austria west to the Netherlands and north to Scandinavia. Much of the support for renewables in Europe is driven by a prevailing hostility to the pollution generated by fossil fuels, whether that is expressed as acid rain, "summer smog," or climate change. Many policy decisions in these nations and in the European Union (EU) are imbued with environmental sensitivity. This helps explain why these governments have adopted many of the world's most stringent environmental standards, especially for energy-related activities. For example, emission limits for sulfur dioxide (SO₂) and oxides of nitrogen for coal-fired power plants are an order of magnitude more demanding than those in the United States.

The Role of the European Union (EU)

These individual national policies and attitudes are expressed as continental-scale requirements at the level of the EU. While space constraints preclude a review of EU requirements related to energy, a few examples make the EU's hostility to fossil-derived air pollution clear:

At the outset of the negotiations that led to adoption of the Kyoto Protocol to the Framework Convention on Climate Change, the EU favored reducing emissions of carbon dioxide (CO₂) and other greenhouse gases by 15% from 1990 levels. (The initial U.S. position called for zero reduction.)

• EU emission standards for motor vehicles, fuels, fossil-fuel-fired power plants, and energy-intensive industries are the world's most stringent.

• The EU prohibits subsidies for fuels other than renewables, despite a labor movement that in many nations is much stronger than in the United States.

Collectively, these policies have lowered the price of renewable forms of energy and raised the price of fossil-fuel-based energy to the point where renewables can begin to compete on a cost-per-kilowatt basis. This is especially true of wind energy in Denmark, Germany, and the United Kingdom.

Renewable Energy in Japan

While Japan diversified its sources of energy supply following the oil disruptions of the 1970s and 1980s, Japan continued to rely heavily on imported fossil fuels. Until 1998, there was no underlying policy to encourage the commercialization of renewable technologies. Nevertheless, unlike the United States, the nation systematically laid the groundwork for a possible widescale deployment of renewable energy. That move toward renewables has now begun in earnest.

Prior to 1998, Japanese efforts focused on three areas:

• Fundamental technologies: Government and manufacturers collaborated to improve the efficiencies of PV cells, increasing the capacities of wind turbines, and field-testing specific equipment.⁵

• Grid integration: The government, the utility industry, and manufacturers of associated equipment such as inverters cooperated to identify and eliminate technological and other practical barriers to grid integration of renewable technologies.⁶

• Dispersed generation: Recognizing the potential benefits of dispersed power generation using renewable generating systems either in a stand-alone mode or in conjunction with advanced technologies such as fuel cells, government and industry collaborated in developing these as well. Wind conditions, for example, were mapped and prospective installation sites identified.⁷

Clearly, while Japan was unwilling to commit itself to renewable energy in the same way as Europe, it was just as committed to preserving its option to do so. Then in September 1997, barely three months before government representatives gathered in Japan to hammer out the terms of the Kyoto Protocol, the government adopted the Law on Special Measures to Promote Use of New Energies (also called the New Energy Law). Rules, reg-ulations, and guidance for the implementation of that law began to be issued in April 1998, spurring a sharp increase in entrepreneurial interest in renewable energy systems, especially wind turbines. Having carefully preserved its ability to deploy renewable energy rapidly, Japan has now positioned itself to do so.

According to the Ministry of International Trade and Industry (MITI), the current movement toward renewable energy has been spurred by twin concerns: "increased necessity to secure energy security" and "increased necessity to cope with the problem of global warming." These environmental and security concerns make it "indispensable to introduce new energy which has less restraints of resource and environment," according an internal MITI document.⁸

Renewable Energy Policy Outside the United States

1. Abstract
2. Message from REPP Staff
3. Why Are They Doing it?
4. Introduction & Overview
5. Danish Wind
6. German Encouragement
7. Non-Fossil Fuel in Britain
8. Dutch National Plans
9. Japanese Efficiency
10. Successful PVs
11. Lessons for the U.S.

copyright © 1999 by Renewable Energy Policy Project