Bavaria Solarpark, Germany

Dr. Robert Peltier, PE

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Germany has embraced renewable energy in general—and solar power in particular—like no other country in the world. The key driver of "green" generation in Germany has been the Renewable Energy Law (REL) adopted in 2000. The REL (along with mandates for national CO2 reductions under the Kyoto Protocol) has been responsible for development of 2,000 biomass plants, 6,000 small hydro plants, 16,500 wind turbines—and 110,000 photovoltaic (PV) systems (see sidebar).

Inside Germany's Renewable Energy Law

In 2000, Gerhard Schröder's incoming government and his coalition partner—Germany's Green party—passed the Renewable Energy Law (REL), without which the Bavaria Solarpark and other renewable projects in the country undoubtedly would not have come to fruition. Germany is serious about having renewable resources fuel 25% of generation in its electricity sector by 2020. By 2005, renewables' share was 10.2%, so the effort is off to a good start. Landmark legislation such as the REL, and public policy initiatives now being implemented in other European countries (most notably, Spain) and U.S. states are seen as the best way to make power generation "greener" everywhere.

In general, REL guarantees fixed tariffs for putting "green-generated" electricity on the grid. Companies and individuals that decide to invest in photovoltaics, for example, receive from the national government an incentive of 51 cents/kWh (that's not a typo) over 20 years, decreasing 5% a year over the project's life. In combination with Germany's existing PV funding program, which offers zero-interest loans, PV projects are considered very attractive. The market has responded accordingly: More than 40 MW of PV systems were installed within one year of the REL's enactment.

Other renewable technologies are assigned similar 20-year subsidies (which are likewise adjusted down 5% annually) that U.S. developers would die for. Examples include:

Small hydro and biogas: 7.96 to 9.67 cents/kWh
Biomass: 1.074 to 12.640 cents/kWh
Geothermal: 9.03 to 11.25 cents/kWh

The difference between the American and European approaches to promoting renewables could not be more striking. "Germany chose a price-fixing scheme, as have other countries such as Spain and France," said Johannes Lackmann, president of the German Renewable Energy Association. "In every case, the approach has contributed to the development of a stable market for renewable energies, particularly solar and wind power."

The latest available data indicate that $3.6 billion was spent on German PV projects alone in 2005, up from $2.7 billion in 2004. Two years ago, Germany generated 1 billion kilowatt-hours of PV power, and the solar industry there expects that number to rise to nearly 3 billion kWh by 2011. In 2005 alone, Germany's installed PV capacity grew 53% to 837 MW, or 57% of the world market (Figure 1).

1. Deutschland über alles. Installed PV capacity totaled 1,460 MW as of 2005, with the largest chunk belonging to Germany. Source: Solarbuzz LLC

Sadly, the U.S. is an also-ran in this race. One part of the Bush administration's tepid response to America's "addiction to oil" is the "President's Solar America Initiative" released this February. Although it proposes the largest increases in funding for solar energy research in U.S. history, the initiative focuses more on the long term than the short. Its stated goal is to make solar cost-competitive with traditional types of power generation in a decade, through the deployment of (a mere) 5 to 10 GW of PV capacity by 2015.

The comparative urgency of America's and Germany's policies for supporting renewable resource development is apparent. Germany made the costs of installing PV systems bearable now by guaranteeing 20-year interconnection contracts and having all customers share the costs of the subsidy, and the market responded in an instant. The result: Germany will surely break the 1 GW mark for installed PV capacity by the end of this year, further extending its lead. The downside of spreading PV development costs across all consumers, however, is upward pressure on rates: Average residential rates are now hovering at 18.6 cents/kWh, with taxes accounting for 7.3¢ of the total.

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