The Week in Germany
Dear TWIG Readers,
Unless you do not manage to strike it rich, a gold rush can only be a good thing.
And at the moment, "Germany's Having a Renewable Energy Goldrush," as one headline at sustainablebusiness.com recently proclaimed.
"The country's latest version of its feed-in law - the hugely successful tool it's used to become a world leader in solar - now extends to onshore and offshore wind, geothermal, and biomass - to help it quickly diversify into the full range of renewable resources," the story beneath that glowing headline underscored.
An incentive to invest in renewables
Germany's famous feed-in tariffs for such renewable energy sources are regulated via the Erneuerbare-Energien-Gesetz (EEG), or Renewable Energy Sources Act, first put forward on April 1, 2000, as a successor to the Stromspeisungsgesetz (StrEG), or "Law on Feeding Electricty Into the Grid," of 1990. The German feed-in tariff, or FIT, is not a tax-based subsidy, but a ratepayer based model.
The basic philosophy behind these feed-in tariffs is simple: homeowners, business owners, farmers, or private investors switch to renewable sources of power, for instance by installing solar panels on their rooftops. The electricity that they generate has priority on the grid and is bought by the utilities at a higher fixed price for 20 years. This guaranteed assistance pays off their initial investment and provides long-term stability for investment decisions.
Range of technologies
The upshot: a range of technologies (wind, solar, biogas, etc.) can be developed, as investors now have an incentive to support them.
So a feed-in tariff (FIT) is a policy mechanism designed to accelerate investment in renewables, which it achieves by offering long-term contracts to renewable energy producers. Feed-in tariffs also often include "tariff digression," a mechanism according to which the price (or tariff) ratchets down over time.
(In the United States, the first feed-in tariff was introduced in 1978 by President Jimmy Carter when he signed the National Energy Act.)
The primary premise is that government-backed financial incentives help get cleaner electricity produced by renewables into the system, but are eventually decreased as less costly production methods and delivery mechanisms are put into place and these once fledgling industries are out of the starting blocks.
Solar down, as competitiveness goes up
This is the logic behind why the German 2012 PV Feed-In Tariff has been reduced by 15 percent. "Depending on the type of installations, the 2012 PV feed-in tariffs for newly installed systems will therefore range from 17.94 ct/kWh to 24.43 ct/kWh," is how the two lawyers behind germanenergyblog.de explain it.
Given that the German Government made a landmark - and internationally unprecedented - commitment earlier this year to completely phase out nuclear power by 2022, there is no time like the present to continue full steam ahead with the EEG and its feed-in tariffs, even as the solar power tariff was just reduced in a bid to gradually decouple that hugely successful sector in Germany from the feed-in system.
Job growth engine
At present, 20 percent of Germany's electricity comes from renewable energy, up from 6 percent in 2000. And this figure is due to increase to 35 percent by 2020 as Germany continues to "retool" its infrastructure towards an ever cleaner energy future - and create thousands of jobs and bolster multiple cross-cutting new industries in the process. Among the companies involved are wind turbine manufacturers and their supply chain, solar PV manufacturers and biomass plants that use farm waste.
"Renewable energy has become extremely valuable for our state," Erwin Selling, premier of the windswept northeastern German state of Mecklenburg-Western Pomerania said in a recent interview with Reuters. "It's just a great opportunity - producing renewable energy and creating manufacturing jobs."
According to Selling, the rush to tap offshore wind and farm waste feels like an old-style gold rush. Mecklenburg-Western Pomerania, for instance, aims to cover 100 percent of its electricity needs from renewables by 2015-2017, and then export the excess to other German states.
There are now more than 370,000 people working in the renewable energy sector, according to the Federal Environment Ministry.
"About two thirds of these jobs can be attributed to the impact of the EEG," it recently stated on its Web site.
Reduced dependency on fossil fuel imports
And, also according to the Federal Environment Ministry: "Last year, investment in the renewable energies sector in Germany rose to a record high of almost 27 billion euros. The EEG accounted for around 90 percent of this.
"Furthermore, renewable energies reduce Germany's dependency on energy imports and associated economic risks. In 2010, the power generated from renewable energy sources alone made it possible to save approximately 2.5 billion euros on fossil fuel imports; around 80 percent of this is due to the EEG.
"These savings are accompanied by an enormous contribution to climate protection. Overall, renewable energies reduced greenhouse gas emissions by around 118 million tons last year."
Transatlantic Climate Bridge (TCB)
The German Government promotes the exchange of best practices on boosting energy efficiency and renewable technologies at local, regional and national level among German and North American policymakers, business leaders, and researchers via the Transatlantic Climate Bridge (TCB) initiative.
Working together with the United States and Canada, which is also part of the TCB, Germany and technologies "Made in Germany" can help combat climate change. Together countries all over the world can make a difference in finding solutions to the problems it poses today.
And such great challenges often breed great opportunities - many new jobs can be created in the process, as Germany's EEG law and its widely praised feed-in tariffs clearly illustrates.
Editor, The Week in Germany