CASE STUDY: Germany and Alternative Energy

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Germany's Bid For Solar Excellence Scuppered by Upstart Geothermal? by Judy Collins

In 1991, a quiet but effective revolution began in Germany. It consisted of 5 paragraphs and didn't even provide any future promises (or funding), but it gave something to the average citizen that he didn't have before...commercial access to the grid.

The law was entitled Stromeinspeisungsgesetz (commonly known in the US as the Energy Feed-in Law). From 1991, all suppliers of electricity, including private citizens, were granted access to the electrical grid and, by law, would be compensated at an unprecedented premium for all energy sent into the network. By far, the highest commissions were paid to the suppliers of solar power, starting a race to go solar in Deutschland.

The law was revised in 2000 and now called the Renewable Energy Sources Act to include energy supplied by geothermal derivations such as geysers, natural steam, geopressurized reservoirs, etc. Perhaps not something the average person has access to, but certainly of interest on a corporate level.

Ironically, most geothermal energy is not very "renewable" as it is mined faster than it can regenerate, but it is clean and efficient. There is no mistaking that this addition was added, in fact, to attract new business to the clean energy market. More importantly, the 2000 version set a time frame for new investors of 20 years. What that achieved was the insurance and reassurance that people needed before such a huge commitment could be granted for their individual projects.

On the negative side, the 20 years came with decreased tariffs over time. Why decrease the tariffs? Simply put, the government had set a ceiling of 5% total energy production by the methods outlined in the original Stromeinspeisungsgesetz. Solar panels were going up all over Germany faster that you could say "sauerbraten".

Although not funded directly by the government, budget considerations still had to be weighed as the electricity consumer picked up the tab for the subsidies. The tariff reductions simply mitigated the government's set budget for the project. In addition, the newer law put Germany in line with the EU's energy regulations requiring frequent review, rates reflective of overall cost, different rates based on type, different rates based on size of facility, and a generally degressive mobile payment structure. The goal of this bill was to reduce carbon emissions by 3% by 2010 and enable green electricity to become 10% of the overall energy supply by the same year. This goal was surpassed in 2007, at which point 12.5% of total energy was green energy.

In keeping with the EU's standard of "frequent performance review," the law was once again revised in 2004. This time, no great name change. It became the 2004 Renewable Energy Sources Act. Since reaching goals set in 2000 so early, this revision raises the bar to 27% by 2020. These enterprising ambitions and the tools implemented to achieve these agendas have put Germany forward as a renewable energy pioneer in terms of sheer scale.

The newer law accounted for up and coming market developments and rewards for innovation in sustainable sources of power. Since the initiation of the Renewable Energy Sources Act, tariffs paid out to suppliers have been more finely tuned, promoting photovoltaic, geothermal, and biomass overall. However, payouts under this bill were dynamic with new developments and technologies.

Wind power payments under the 2004 act, for example, were reduced due to a reduction in overall costs secondary to technological advances. By degressing fees paid to suppliers, the government hopes to ignite creative stream-lining innovations, which, based on fluctuating payments, rewards the design model, but saves on the long term.

Another aspect of the 2004 legislation is the fixed tariff scheme. Suppliers could "lock in" a rate based on the year of initiation. The rate would be good for 20 years plus the year of commencement. Once again, this is a call to action. The sooner you're in, the more profit you can extract. Producers of electricity are protected from future changes to the law by this key piece of the legislation.

As of 2008, amendments in the Energy Act, or EEG (Erneubare Energien Gesetz) lessen the focus on solar production by reducing the tariff for rooftop solar panels by 8% in 2009 and 2010 and then 9% annually after that. Ground level solar parks will suffer a 10% reduction in compensation in 2009 and 2010 (a decrease of 3.5%).

Wind energy promotion is the focus of the latest revisions set forth by the governing body. So, is wind the new King of Renewables? Solar power is perhaps less heavily promoted than in the past, but one must see that as a sign of success of the program. Falling subsidies indicate that the industry is healthy and has less need for gross promotion. Is wind the next "big thing" in Germany?

Don't count out geothermals just yet. Although the "renewability" of geothermal power is in debate, geothermal drilling goes on and was given an early boost in 2000 and further support in 2004. There are currently 150 geothermal plants in the development stage held back at the moment due to the cost of the drilling equipment necessary. Not to be daunted, German manufacturing plants are expanding drill production for the sector. Six geothermal plants are in the process of opening this year (2009) and into 2010.

So, what does this mean for the rest of us? Well, look at it this way. A country with relatively moderate sun exposure and no volcanic activity in 7,500 years is actually a leader in producing solar power and geothermal energy. To say that Germany is inspiring is a vast understatement.

If the U.S. made a serious attempt to duplicate Germany's success, the impact on the environment would be staggering. U.S. representative Jay Inslee from Washington state introduced the Renewable Energy Jobs and Security Act in June of 2008, but it stalled. On a brighter note, Gainesville, FL just passed a law (March 2009) to compensate providers of solar electricity at a premium rate through net metering. City officials passed this bill unanimously after studying the success in Germany. Hawaii isn't far behind and will likely have a similar plan in effect by the end of the year. I think that this is how we are going to achieve results in the U.S.: one state at a time until the job is done.

15-Mar-09

Judy Collins

http://www.projectearthnow.com

http://blog.projectearthnow.com

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