Renewable Energy Tariffs--Has Their Day Come?

by Paul Gipe

 Paul Gipe, Acting Executive Director of Ontario Sustainable Energy Association

"While Americans vainly struggle to re-instate their Production Tax Credit for wind energy, Canadians push to increase payments under the ill-named WPPI (Wind Power Production Incentive), and environmental groups clamor for Renewable Portfolio Standards, the Germans just forge ahead with their renewable tariffs."

The short answer is yes. One doesn't have to look beyond Germany to see their benefits. While the Danes may have created the concept of renewable tariffs, it was the Germans who took the idea to the next level and put the power of the world's third largest industrial economy behind it.

No one has made a more profound and consistent commitment to renewable energy than the Germans. And with recent revision of their ground-breaking Renewable Energy Sources Act (Erneuerbare Energien Gesetz, or EEG), they will maintain their momentum--and their leadership--in renewable energy development.

Germany's EEG not only explicitly states that renewable power generators have a right to connect to the grid, but also spells out exactly how much they will be paid and for how long. The EEG sets out specific prices for a host of technologies, from wind energy to manure-fired power plants. It's this level of detail that separates what French researcher Bernard Chabot calls Advanced Renewable Tariffs from the Danish system and the earlier German one.

For North Americans, the numbers are simply staggering. Since 1991 when their program was launched, the Germans have installed more than 14,000 megawatts of wind-generating capacity, more than twice the amount constructed in all of North America. Last year alone, Germany installed more than 20,000 solar-electric systems. This year they expect that number to increase by another 50 percent.

Germany now leads the world in almost every category of renewable energy development. They are the world's largest manufacturer of wind turbines. In solar-electric systems, they are second only to Japan. Germany leads Europe in generating electricity from biomass as well.

While Americans vainly struggle to re-instate their Production Tax Credit for wind energy, Canadians push to increase payments under the ill-named WPPI (Wind Power Production Incentive), and environmental groups clamor for Renewable Portfolio Standards, the Germans just forge ahead with their renewable tariffs.

More than 45,000 people are employed in the German wind industry, and another 10,000 work in the solar-electric sector. Germany expects employment in renewable energy to rise to more than 100,000 by 2010.

More than 300,000 Germans now own shares of wind turbines. Worldwatch's Janet Sawin notes that with so many employed in the renewables industry and with so many owning solar, wind, and biomass power plants, renewable energy in Germany enjoys broad political support from people in all walks of life.

It would be easy to dismiss renewable tariffs if they were successful only in Germany. That's not the case, however. Renewable tariffs, feed laws, or--as Ole Langniss at the Center for Solar Energy & Hydrogen Research in Stuttgart calls them--Minimum Price Standards, have driven Spain to become a wind powerhouse in its own right, pushing it ahead of the mighty USA.

France, a country not known for its enthusiasm for non-nuclear sources of energy, has embraced Chabot's advanced renewable tariffs. Though the French system is not without its weaknesses--chief among them being a tariff for solar-electric systems too low for profitable development--it has spurred feverish activity. Chabot, a researcher at ADEME (Agence de l'Environnement et de la Maitrise de l'Energie) in the south of France, reports that since French renewable tariffs were implemented, some 14,000 megawatts of applications for building permits have been filed. French planning bureaucracy is now the only roadblock to another market the size of those in Spain and Germany.

Today there are nine countries in Europe and South America using renewable energy tariffs as the principal pricing mechanism. Two more European countries are considering renewable tariffs: Italy for solar-electric systems, and the Czech Republic for wind and solar energy. Turkey's parliament will debate the issue when it returns from its summer recess this fall.

More significantly, China has concluded that it's not ready for Renewable Portfolio Standards and their sophisticated trading schemes. At the World Wind Energy Association's annual conference in Beijing this November, China is expected to announce that it will move forward with some kind of renewable tariff.

There are even faint stirrings of interest in renewable tariffs in North America, the RPS stronghold. Advocates are no longer limited to Europe-savvy academics like Jim Manwell at the University of Massachusetts, solar industry observers such as Janet Sawin at Worldwatch, or campaigners like Steve Sawyer at Greenpeace International.

Renewable tariffs, or as some North Americans dub them, production-based, premium payments, are becoming mainstream. This fall Prince Edward Island's legislative assembly will consider Minister of Energy Jamie Ballem's proposal to supply 100 percent of the province's electricity with renewable energy. Ballem plans to meet that goal in part with a renewable tariff for community-owned wind turbines.

And what of California, the birthplace of RPS? Maybe it will take an Austrian to revamp the on-again, off-again, administratively-demanding capital subsidy for solar-electric systems that has bedeviled solar installers since so-called electricity restructuring in the late 1990s. With the political uncertainty in the USA, anything is possible as prices for both oil and gas rise simultaneously.

Renewable energy tariffs are not only holding their own against the RPS and problem-plagued British tendering systems, they're gaining converts. Ole Langniss, in his masterly doctoral thesis concluded that "There is no policy shift toward RPS." [Emphasis appears in original.] Langniss found that the number of countries adopting renewable tariffs continues to grow.

Like Langniss, Worldwatch's Sawin sums up the different market mechanisms for developing wind and solar energy by noting that renewable tariffs, or pricing laws, have consistently proven to be the most successful. Countries with renewable tariffs see the most significant growth and the strongest domestic industries.

Renewable Energy Tariffs--their day has indeed come.



Paul Gipe is the Acting Executive Director of the Ontario Sustainable Energy Association in Toronto Canada. He is the author of Wind Power: Renewable Energy for Home, Farm, and Business (ISBN: 1-931498-14-8), 2004.


READER COMMENTS

 

Renewable Energy Tariffs--Has Their Day Come?
From Anonymous on 2004-08-24
Germany isn't the world's largest manufacturer of windturbines. Denmark is, with Vestas (30% of world market share). However it is correct to say that a lot of Denmark based Vestas' windturbines end up being put up in neighboring Germany.
Renewable Energy Tariffs--Has Their Day Come?
From anonymous on 2004-08-24
Your mistaken, Germany is the largest installer of turbines in the world, ahead of Denmark. Current production numbers quoted in the recent AWEA publication confirm this.
Renewable Energy Tariffs--Has Their Day Come?
From Philo Collins on 2004-08-24
Since renewable energy tariffs work -- let's have them!
Renewable Energy Tariffs--Has Their Day Come?
From Anonymous on 2004-08-25
"Today there are nine countries in Europe and South America using renewable energy tariffs as the principal pricing mechanism.": Could you please name these countries? Thank you
Renewable Energy Tariffs--Has Their Day Come?
From USA Solar & Wind Inc on 2004-08-25
It seem's like renewable energy in the US is just starting to take off. Ever increasing calls on home business and farm type projects are a multi daily event now. These calls have more than doubled in the last two months. Web base inquirys are up by one third. I think America is soon to have a explosive growth rate in green energy developement. Now the only question is can we supply the growth there is all ready backorders on wind and solar puting one to two month delay on shippments for Solar & Wind products.

Renewable Energy Tariffs--Has Their Day Come?
From Dr. Rex A. D'Agostino on 2004-08-25
All the hype about RET's is fine but it won't come to the US unless and until we have a strong federal mandate and a leadership team in the White House that isn't afraid to buck the cartel mentality and provide solid legislation in favor of renewables.
Renewable Energy Tariffs--Has Their Day Come?
From David Shepard on 2004-08-25
The U.S. should enact such tariffs but powerful lobbies will oppose until their backers' economics favor them.

Flying Electric Generators will be able to generate electricity at less cost than starting from fossil fuel, and then at least electric power producers should become a significant ally.
Renewable Energy Tariffs--Has Their Day Come?
From Anonymous on 2004-08-25
Renewable Energy Tariffs will not happen in the USA until the energy industries are postured with incentives (tax breaks, grants, etc.) to make it profitable enough. This drives the political situation in the USA.
Renewable Energy Tariffs--Has Their Day Come?
From Perico on 2004-08-26
RETs will happen in the U.S. if the political will exists. Compared to the FCC, e.g., the FERC traditionally has been a weak fish; expect it to keep floundering. As much as I hate to say this, it is up to the states to step up and establish a value for "alternative" energy and commit to long-term regulatory frameworks that establish clear price signals to incentivize investment that meets the concommitant goals of energy mix diversification and greening. Incentives by themselves have a pretty weak track record. It is time to establish "pay to play" mechanisms and not pander to Big Energy. Deregulating the utilcos and cramming net metering that observes real-time, economic pricing of electricity is an important start. Getting consumers to understand that they have been paying subsidized rates for transportation fuels is also necessary. Note the evolution of the REAL costs of energy over time, not nominal. Getting auto and electronics manufacturers to build more efficient equipment is also important. Carter had it right. You need to control both demand and supply. Ricardo also had it right. Finite resources are scarce, and we are going to learn what that means the hard way if this country does not come up with a sensible, integrated energy policy. Too bad we have forced the states to lead the way.
Renewable Energy Tariffs--Has Their Day Come?
From Larry Liesner on 2004-08-28
Can you explain exactly what a renewable energy tariff is? Is it like a green tag where the consumers buy green tags and the utilities have to buy green power for them. Or is it a guaranteed payment to renewable suppliers? Thanks.
Renewable Energy Tariffs--Has Their Day Come?
From angela on 2004-08-30
Here it is.
Renewable Energy Tariffs--Has Their Day Come?
From Anonymous on 2004-08-30
Oops, my first message was accidental.

Green Tariffs are consumption-based. Customers receive a portion or all of their electricity from renewable sources and are charged with a premium on the standard electricity fee. This premium corresponds to the difference between the utilities' average power production cost and the cost to produce the respective renewable energy.

 

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