Germany’s key to green energy

While other nations hunt for ways to wean themselves from fossil fuels, Germany is in the throes of a green revolution that has made it the global leader in solar- and wind-power generation.

The reason? A pioneering law that requires utilities to buy electricity from renewable sources at premium rates. This means anyone with a rooftop solar generator or a small water turbine can sell the energy they produce at a healthy profit.

“It puts power in the hands of the people,” says Stefan Schurig, energy director for the World Future Council, which promotes sustainability.

Following Germany’s lead, more than three dozen nations, from Spain to Indonesia, have adopted some variation of the policy, known as a feed-in tariff. In the US, six states and Congress are weighing similar bills. “We’ve had two great exports from Germany: sauerkraut and the feed-in tariff,” says Jay Inslee (D) of Washington, one of the federal bill’s sponsors. “Germany has pole-vaulted over other countries when it comes to clean-energy technology, and that’s gotten people’s attention.”

The goal behind feed-in tariffs is to foster a growing network of small and medium-size energy producers. In Germany, at least a dozen communities now produce much or all of their own energy, using everything from ultrathin photovoltaic panels to cow manure. A few have gone even further. Residents of Dardesheim, a hamlet in the hardscrabble east, now own enough windmills to power 10,000-plus homes.

Supporters of the policy argue that such a grass-roots movement is the only way renewable energy will ever be deployed on a large scale. “The big energy companies have too many vested interests in sticking with conventional energy sources,” explains Hermann Scheer, a veteran parliamentarian who pioneered Germany’s feed-in tariff. “They will never be the driving force behind renewables.” (See the Monitor's Q&A with Mr. Scheer.)

In many cases, market rates for renewables are too low to justify investing in equipment, which has stymied development. Advocates argue that requiring utilities to offer premium rates encourages renewable energy production and investment. This creates new jobs, speeds up development, and eventually drives down costs – while fossil fuel prices are likely to keep rising.

Not just for idealists anymore

Since 2004, employment in Germany’s green-energy sector has climbed from 160,000 to nearly 300,000. According to a study by Roland Berger, a research and consulting firm, green technology is expected to pass the auto and electrical engineering industries to become the nation’s No. 1 employer by 2010.

What’s more, since Germany adopted its first comprehensive feed-in tariff law in 2000, renewable energy has grown from 6 percent to 14 percent of the market, a milestone it didn’t aim to reach until 2010. Despite its cloudy climate, the nation now has more than half the world’s solar-power generating capacity, and is the leading destination for green technology investment with $14 billion invested last year alone.

These gains are funded by electricity consumers, who pay about $4 a month extra per household. Much of the profit also goes to ordinary citizens. Among them is architect Rolf Disch, whose home looks like an upside-down rocket with a giant, rotating solar panel on top. The building generates 9,000 kilowatt hours of electricity a year, five times more than it uses. By feeding this energy into the grid, he earns more than $3,000 a year. [Editor's note: The original version overstated the amount of money Mr. Disch earns by selling his surplus electricity.]

“It used to be only idealists were interested in solar,” says Mr. Disch, a professed idealist who has designed solar cars and gas stations. “But now there’s money to be made from the sun.”

US Congress considering a similar law
Like its German counterpart, the feed-in tariff bill before the US House, known as the Renewable Energy Jobs and Security Act, would guarantee renewable-energy producers long-term contracts at above-market rates. To encourage small investment, it would also set a 20 megawatt cap – roughly the quantity produced by 10 wind turbines.

Hawaii, Rhode Island, Michigan, Illinois, and Minnesota are weighing similar bills. California, which introduced a feed-in tariff in 2006, is considering retooling its policy so that rates vary by technology and are tied to cost of production – a system favored by renewable-energy advocates because it rewards investment in more costly sources, such as solar power.

These proposals have drawn criticism from the electricity industry, which argues they will make the grid more difficult to manage and drive up energy bills. “If you force utilities to pay heavily subsidized, above-market rates, somebody will have to pick up the tab, and it’s going to be customers,” says spokesman Ed Legge of the Washington-based Edison Electric Institute, an association of electric companies whose members serve 70 percent of the US market.

But the policy enjoys wide support among environmental groups. Comparative studies by the European Union and independent scientists show feed-in tariffs deliver better results at a lower cost than other tools, like renewable-energy quotas. But the biggest selling point for backers is that they rally capital.

“This is the sharpest tool in the toolbox because it’s the most effective in driving investment into renewable energy,” says Representative Inslee. “It also promises the tremendous side effect of making America competitive in green technology. But we have to act soon, because there isn’t much time to lose.”

How Germany became so green

The nation has pioneered feed-in tariffs, an incentive program to increase renewable energy output. It requires electric utilities to:

• Give green energy producers access to the grid

• Give them long-term contracts (usually 15-20 years) at above-market rates

• Buy all electricity generated by qualified renewable sources

Whereas other policies, such as tax credits, favor big companies who can afford large upfront costs, feed-in tariffs encourage small, local production. Comparative studies have found feed-in tariffs are most effective in spurring renewable energy generation.

• Next: How the humble farming village of Freiamt has not only achieved energy independence, but now produces 17 percent more energy than it uses.