Renewable Energy Policy Outside the United States
Germany's Encouragement of Renewable Energy |
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Germany has relied principally on a relatively simple and straightforward mixture of mechanisms—higher fixed payments combined with subsidies and cheap loans—to encourage renewable energy.15 The results have been remarkable: use of wind energy in Germany has shot up from almost nothing in 1990 to 2,875 megawatts in 1998. The Electricity Feed Law Much of the success of the German renewables program can be attributed to the 1990 Stromeinspeisungsgesetz, literally the Law on Feeding Electricity from Renewable Sources into the Public Network (usually referred to in English as the Electricity Feed Law, or EFL). The EFL requires electric utilities to pay a fixed rate, equal to 90% of the retail residential price, for electricity generated from wind energy, solar energy, hydropower, sewage or landfill gas, or biomass residues from agriculture and forestry. There are some exceptions to this mandate—for instance, small utilities for which the EFL would increase the average electricity price significantly.
In addition to the federal law, some German states have adopted their own laws to encourage renewable energy. For example, North-Rhine Westphalia has allowed its utilities to raise customers' prices by as much as 1% to pay for electricity from renewable sources, including the full cost of PV installations. National banks, including Kreditanstalt für Wiederaufbau and Deutsche Ausgleichbank, offer loans at rates 1—2% below market levels for investments in renewable energy. These loans may fund 75% of project costs. To facilitate the development of wind turbine technology, Germany also adopted in 1990 a new large-scale demonstration effort called the 250-MW Wind Program. It provides a subsidy based on either electricity output or capital costs. The program provides investment subsidies of 200 deutsche marks ($106) per kilowatt, up to a ceiling of 100,000 deutsche marks ($53,000) per project or to 150,000 deutsche marks ($80,000) for facilities larger than 1 megawatt (MW). As with other European nations, these subsidies for renewable energy have particularly stimulated growth of wind energy. In Germany, the incentives have not only spurred the rapid development of the world's largest installed wind capacity, they have created a wind turbine manufacturing industry where one scarcely existed. The success of the German wind energy program has even created pressure to reduce or modify incentives: Because most of the wind resource in Germany is located in the northern regions, the rapid expansion imposed the bulk of the mandatory subsidy on a limited number of ratepayers, driving up their electricity prices. After these ratepayers and their utilities protested, uncertainty about continuation of the tariffs chilled investment and sharply slowed the growth rate of wind power in Germany (this reaction also demonstrates that the most important aspect of a subsidy may not be its specific elements or amounts, but its certainty). After the relative collapse of the turbine market in 1996, Germany's wind sector rebounded the following year, however. Due to the use of ever larger machines, installed capacity jumped by 24.9% in 1997, although the number of new turbines rose by only 5.7%. As of December 31, 1997, Germany had 5,193 wind turbine generator systems, with an installed power of 2,081 MW. The average installed power per system was about 400 kW and growing. In 1997, developers added 849 systems, with a combined capacity of 533 MW, representing a system average of about 630 kW. Thus German machines are moving beyond the 500/600 kW class, and are approaching the megawatt range. Despite the recovery of domestic installations, German turbine exports slumped badly in 1997. This was due in part to the bankruptcy of Germany's largest manufacturer, Tacke Windtechnik, and its reorganization (Tacke has since been purchased by Enron). Still, Germany only exported turbines equivalent to 54 MW of capacity in 1997, despite very rapid growth in both European and global markets. The Electricity Feed Law has been a major factor in the dramatic growth in photovoltaic sales in Germany. Installations of grid-connected PVs rose from 2 MW in 1991 to more than 11 MW in 1997—a 450% spurt. Prices have also fallen during this period, from 27,000 to 17,000 deutsche marks per kW—a drop of more than one-third. These market developments are attracting more firms and investments, which should boost competition and drive prices down even further. Deutsche Shell AG (German Shell) is building a PV factory with an annual capacity of 25 MW that is due to go into operation in late 1999. The 100,000 Roofs Program Germany is not resting on its success with the feed law for solar. On January 1, 1999, the government launched a 100,000 Roofs program for photovoltaics. Under the six-year program, the German government assigned a bank to issue 10-year, interest-free loans that recipients must repay in eight annual installments. The bank assumes liability for the loans, which can then be issued by smaller "house" banks to purchasers of PV systems. Banks make loan commitments within five days to minimize red tape and uncertainty, and can even issue the loan in full immediately, to cover almost 40% of the cost of a PV system. The program, which will cost almost 1.1 billion deutsche marks ($583 million), should be the largest single PV subsidy program in the world. If the government has its way, it will also be one of the least bureaucratic renewable energy subsidy programs.16 |
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Renewable Energy Policy Outside the United States |
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