From Michael Laybourn
After advising Obama the way to go (see Solar Letter To Obama), I thought that maybe I would write down my reasoning to see how it held together. Time for some research. I knew Germany had created an explosion of alternative energy growth and has now become the worlds most advanced alternative energy country.
So, let’s take a trip to Germany.
How did Germany become the leading country for renewable energy production? It wasn’t fear of power outages or high gas prices but economic incentives that jump-started the solar revolution in Germany. (When I say solar, think renewable energy, including wind, biomass, geothermal, etc.)
“The rocketing growth of solar energy in Germany is the direct result of the German Renewable Energy Sources Act(EEG). The law guarantees that farmers, homeowners, and businesses can connect to the electric grid and the law spells out exactly how much they will be paid for their electricity and for how long.” – -Gerhard Stryi-Hipp of the German Solar Industry Association.
Unlike other mechanisms used to develop renewable energy, the German law asks for the active participation of its utilities, citizens and small businesses. German homeowners typically install solar systems about 3 kilowatt (kW) in size, sufficient to provide two-thirds of the electricity used by an average German home. German government instituted low interest loans and subsidies for alternative energy, then wrote into law that the utility companies had to pay a higher price for this new and clean energy they were getting from all sources, including the solar homes and businesses.
→The EEG guarantees that, for a limited time, the nation’s electric utilities must buy all wind, solar and other renewable power at a price per kilowatt-hour higher than that of power generated from coal, nuclear or natural gas. For example, each person on the national program receives 50 cents for each kw/hr generated and when they buy it back from the grid, they only pay at a rate of 20 cents, therefore almost always making a profit each month in order to more quickly pay back the solar loan. This is called the feed-in tariff (FIT), which declines every year, so that each year the utility pays less for the energy. The rate at which the feed-in tariff declines is now set at 5 percent a year.
There are two main options for financing the feed-in tariffs. The costs could be covered by a cost sharing mechanism for all electricity end-users, or it could also be done through a fund. Most countries with FIT laws, including Germany, have financed it through a cost sharing mechanism. Such a mechanism equally distributes the costs on to the electricity bills of all consumers. This usually ensures that the cost per consumer is very low – in Germany it comes to approximately €1.50 per month per household. The major political advantage of this financing method is that it is separate from the national budget, and therefore less vulnerable to changing political moods.
So the German utilities now pay a premium for clean solar electricity over fuels that create green house gasses. Now of course, all utilities will and do say, we can’t afford this, etc., it’s not a free market, subsidizing, blah blah… Once again, let me scoff: The cost of the production of renewable energy sources seems higher than the production cost of conventional energy sources at this point in time. But this is largely due to the fact that the overwhelming share of the external costs associated with the generation of electricity from conventional energy sources is not reflected in the price; instead, these costs are borne by the general public and by future generations. Think Superfund, among other costs. In addition, all conventional energy sources still benefit from substantial governmental subsidies which keep their price artificially low. Of course, right now in the US, as we read, we have nuclear, coal and corn lobbyists are clawing for some of the new energy subsidies promised ….
The introduction of a pricing at the expense of polluters is more legitimate and more justifiable in the field of energy supply simply because of the ecological damage associated with conventional electricity generation. Spain, France, Italy and Greece have copied Germany’s solar incentives. Their utilities offer a variety of generous rebate programs. They also encourage the production and sale of excess solar electricity. This helps the owners of photovoltaic systems recoup their investment in a shorter amount of time. This is in contrast to places like California, where residences with solar connected to the grid can zero out their power bill, but don’t receive payment for any other power fed into the grid. Thus giving the utilities free power!
Let me repeat: There is nothing wrong with an added tariff for solar. It’s better quality energy. This tariff structure has the effect of encouraging solar power installation as early as possible in order to take advantage of the higher rates. The rate structure is also divided up by size, with higher rates generally going to smaller facilities, expressly to encourage the development of a diverse, decentralized power production. This principle, of course, would mean a more stable energy system with no brownouts and eventually cheaper energy.
Results? “Thanks to its aggressive push into renewable energies, cloud-wreathed Germany has become an unlikely leader in the race to harness the sun’s energy. It has by far the largest market for photovoltaic systems, which convert sunlight into electricity, with roughly half of the world’s total installations. –NY Times” The amount of electricity generated by these installations rose 60 percent in 2007 compared with 2006, faster than any other renewable energy. In Germany, people (homeowners), environmental associations, trade unions, the farmers associations, and the renewable energy industry have all applauded the law. It is seen as the most progressive piece of legislation for clean and renewable energies world wide, marking a break-through for a sustainable energy future in Germany.
In summary, to do this we need to offer low interest loans and rebates, control the utilities in terms of buying power, the rest will happen naturally. If this can be done by national governments, why not by a state government? It certainly can if the politicians get behind it and actually do something about it, but in California, governor Arnold Schwarzenegger’s much hyped solar program of in California pales in comparison to that in Germany. The Terminator recently proposed solar rebates of $300 million CAD through 2017. Germans spent seven times more than that in 2004 alone. The real result is that Germany has put together a good plan to stimulate alternative energy and… it worked. Let’s see what Obama can really do…
The State of California? Lots of people were surprised and… if you don’t look too closely, the CA guvernator almost looks like an environmentalist even if he is a Republican. Look closer, gentle people, he has great PR. I looked up the California solar rebate on the solar installation on my house in 2004. The rebate has decreased since the Terminator took office. My system rebate paid 1/2 the cost back – about $9000. Later the lawmakers capped it at $2000 per system, which decreased a rebate for a house by about $6 – 7 thousand dollars. Now the state is bragging about paying up to 30% of the system. Schwarzenegger and the California lawmakers haven’t done anything to improve the solar market or make it easier for us to go solar in our homes. Another mainstream media myth. Too bad. A million solar homes was a good idea…
Next: How about Ukiah?
P.S. Although I resist the notion, it is possible I might have flawed reasoning. I would like feedback from folks about these ideas…