Can renewable energy development keep pace with rising global energy demand? As world governments struggle with this question, Germany is advancing with resolve in a transition to 100% renewable energy. The German government accepts the goal is technically and economically feasible, and has adopted a long-term national policy for the transition. After years of reliance on nuclear energy – which supplies 30% of the nation’s electricity – Germany has concluded that nuclear is a dead-end and has established long term plans to phase it out.
Germany’s most urgent conclusion is that the period lasting until about 2020 comprises “make-or-break” years for the renewable energy transition. It is this conviction that has driven German policy makers to introduce the world’s most aggressive support for renewables, to stick with it during the past decade and to guarantee that support for the next 20-30 years.
The first renewable energy source to receive serious government attention in Germany was wind. In the late 1980s, the government started the “100 megawatts of wind” program, jump-starting the German wind industry. A serious national effort began with the first “feed-in law,” which went into effect in 1991, requiring utilities to hook up to and purchase energy from all renewable energy providers in their areas, and to pay at least 90% of the retail price for the electricity purchased from them.
In 1996, the government amended the Federal Building Construction Law to permit wind generators to be built in natural areas. By 1997, 2100 megawatts (MW) of wind had been installed in Germany.
The country made an important policy advance with the April 2000 introduction of the Renewable Energy Sources Act (“Act on Granting Priority to Renewable Energy Sources,” or EEG). The EEG was most recently amended last July and extended for several more years. Under the new law, onshore wind turbines coming online in 2005 will receive not less than 8.53 euro cents (about $US 11 cents) per kilowatt-hour for the first five years (12 years for offshore development), and 5.39 euro cents (US 7 cents) after that, for 20 years of commissioning. Special incentives are intended to redress reduced power production (hence, revenue) in the lower wind regimes.
Germany’s accomplishments since 1990 have been astonishing. By the end of September, Germany had 15,688 MW of wind installations, delivering 6.2% of the country’s electrical energy. It was the world leader in total installations, as well as in the annual rate of installations. Germany has about 125% more installed wind energy capacity than either the U.S. or Spain, which are virtually tied for second.
Photovoltaics (PV): Germany’s accomplishments in the development of solar energy for both electricity and water heating are as dramatic as those for wind, despite starting somewhat later. This achievement is especially remarkable considering that Germany’s average solar potential is about 1000 kilowatt-hours per square meter per year – about half that of the U.S. Nevertheless, Germany was the fastest growing PV market in the world in 2003, when over 20,000 new PV systems were installed, representing a capacity of 145 MW peak (MWp) and bringing the end-of-year total to over 400 MWp of PV installed.
In 2004, Germany installed another 25,000 PV systems, totaling 300 MWp, double the 2003 installation pace and exceeding an annual investment of 1 billion euros (US$1.3 billion) for PV for the first time.
The PV industry was effectively spurred by the “100,000 roofs program,” which from 1999 to 2003 produced 65,324 PV systems totaling 342 MW of capacity. The aim was to stimulate a new building-integrated PV (BIPV) market. The government initially stimulated this program by offering interest-free 10-year loans, waiving the last installment payment and guaranteeing a “feed-in” incentive of 8.5 euro cents per kilowatt-hour. With the beginning of the EEG on April 1, 2000, the PV incentive price jumped to 50.62 euro cents (US 66 cents). By the end of 2004, Germany had become the world’s No. 2 PV producer and the world’s No. 1 PV installer.
The amended Renewable Energy Act of 2004 assures continued activity in the German PV market. The base incentive remains 45.7 euro cents. This incentive is increased to 54-57 euro cents (US 70-75 cents), depending on the size for PV systems mounted on building roofs (the upper size limit has been eliminated). The incentive is further increased to 59-62.4 euro cents (US 77-81 cents) for PV systems integrated into building surfaces other than roofs (eg., walls).
Because the upper size limit for PV systems has been eliminated, even large ground-mounted systems are assured a revenue stream of 45.7 euro cents (US 59 cents) for 20 years plus the year of commissioning. The law also requires grid operators to give preference to renewable energy generators, and to guarantee connection to the grid even if that means upgrading their transmission facilities. They can recover their costs in the fees they charge for use of their facilities.
Solar Thermal Water Heating: Germany also leads Europe in total and annual installations of solar thermal collectors for water heating. Interest in solar water heating was boosted by the increase of the subsidy, effective February 1, 2003. 2003 sales totaled about 600 million euros. In 2004, 740,000 more square meters were added, about 80% of them for domestic water heating and 20% for space heating.
To keep this sector expanding and encourage applications on apartment buildings, the government is developing a Renewable Heating Act. Whereas the EEG raised money for PV by spreading the costs proportionately over all utility districts, the Renewable Heating Act would raise money with a country-wide tax on oil and gas used in the heating sector, using this revenue to provide an incentive payment per kilowatt-hour of heat generated by solar thermal systems.
Long-Term Commitment Drives Results
At least seven factors were vital to the rapid rise of Germany’s renewable energy industries:
Enlightened politicians, in particular the alliance of the Social Democrat Party and the Green Party, and the leadership of Parliamentarian Hermann Scheer. Federal government leadership, through the adoption, in 2002, of a national strategy for sustainable development, and through the government’s consistent, long-range support for energy-efficiency and renewables. Involved citizens who, mostly working through cooperatives, own 90% of the wind turbines, as well as most PV systems.
Scientific analysis used as the basis for developing government policy. The German parliament formed the Enquete Commission in February 2000 “to furnish scientific evidence to be used as a basis for the German Bundestag’s future decision-making in the field of energy policy.” In its 2002 report to the parliament, the commission concluded, “It is possible to cover the total energy demand [for Germany] by means of solar/ renewable sources.” Subsequent German policy is governed by this premise.
The government’s energy-efficiency policies: On April 1, 1999, the federal government implemented the first step in “environmental tax reform,” by which it increased the taxes on oil, gas and electricity. Further increases occurred each year through 2003. The estimate is that these taxes, which have yielded tens of billions of euros, produced 100,000 new jobs in new energy-efficiency related industries, while contributing to Germany’s commitment to reducing greenhouse gases.
The government’s ethical commitment to the future and the world. Germany has demonstrated this commitment by agreeing to raise its goal for reducing greenhouse gas emissions from the Kyoto Accord’s requirement of 21% by 2008-2012 to 25% by 2005, and by adopting the Enquete Commission’s conclusion that the global energy supply system must be designed in such a way that they will no longer generate any highly radioactive waste in the future.”
The government’s long-term commitment. The German government has established firm goals for renewable energy growth and carbon dioxide abatement for 2010 and 2020. The policy horizon extends to 2030, when nuclear power is to have been fully phased out, and then to 2050, when a dominant share of Germany’s energy will be produced renewably. Germany’s goals extend sufficiently long to assure its renewable energy transition.
To realize a goal of 45% penetration of renewable energy by 2050, energy productivity must also improve by a significant factor, so that total energy use in 2050 will need to be about 37% less than it is today.
Ten Years On, New Jobs, Revenues
By the end of 2003, Germany had an estimated 45,400 permanent jobs resulting from the wind industry alone, a figure expected to increase to 103,000 jobs by 2010. About one new job is created in the German wind industry for every 300 kW capacity installed, for a technology that contributes 6.2% of the nation’s demand for electricity. In contrast, the German nuclear industry, which supplies about 30% of the nation’s electricity, employs 38,000 people. The German wind industry therefore produces 10 times as many jobs per unit of installed capacity, and more than 20 times the jobs in terms of delivered electricity. About 35,000 people are employed in the solar industries. Total solar sales grew by 60% in 2004, to more than 2 billion euros (US$2.6 billion).
Starting from almost no renewable energy applications, Germany has moved to the forefront of global renewable energy in just 10 years. Governments need no longer doubt if it is possible. Other governments would do well to follow suit, by recasting their national energy policies to capitalize on nature’s renewable bounty.