Germany is unique in terms of its advanced renewable energy policy. The Energiewende aims to transform the country’s energy system based on the twin pillars of renewable energy and energy efficiency. The Energiewende is a change in Germany’s policy direction and detailed regulations. It is designed to trigger change in the energy system and in energy technologies – mainly through the shift from conventional to renewable energy – for smart energy use and better consumer participation coupled with the implementation of energy efficiency measures.
Germany is now entering the next phase of its Energiewende. This phase will focus on how higher shares of wind and solar can be accommodated and how the grid infrastructure also can be expanded to ensure that the power system and its actors are more flexible to allow for the integration of electricity from renewables. As part of the continuing transition, the deployment of renewables in the end-use sectors of heating, cooling and transport, as well as the synergies between power and end-use sectors, will be key.
Germany’s wind power and solar PV support programs have led to Germany increasing the share of solar PV and wind in its energy mix significantly, putting the country on a path towards a broadly supported transition towards an electricity system primarily powered by renewable energy. This transition involved new technologies, and as was the case for previous (and now conventional) forms of energy, the development of these technologies required public support – the levels of which are in line with cumulative levels previously provided to other forms of energy. The total level of support has remained low enough that Germany’s economy has continued to perform well – in part due to the (partial) exemption of certain industries, which, while unpopular, is likely a reasonable measure to assure that German companies in energy – intensive and trade-exposed sectors do not suffer an unfair disadvantage. As the recent Ukraine crisis has shown, the transition has also helped reduce the exposure of Germany to potentially volatile input prices to the traditional power system, a benefit that has largely remained unquantified, but could prove significant in the future.
From an historic and international perspective, the feed-in tariff (FIT) is the most commonly used cost-based incentive tool. While FITs are generally cost-based in design, they are regularly performance-based in execution (i.e., the size of the FIT payment is based on the development and operating costs, but the FIT is only paid in response to energy production). Cost-based tariff policies have spread rapidly throughout the world during the past several years, and the number of countries with national FIT policies increased from 37 in 2007 to more than 50 in 2009. Cost-based incentives, such as FITs, have been slow to emerge in the United States. Unlike Europe, the United States historically has used tax incentives to spur renewable energy development; however, there has been a sharp increase in interest in FIT policy development during the past few years. At the beginning of 2006, FIT policy activity was limited to exploratory regulatory proceedings and workshops in a handful of states. As of October 2009, however, FITs were being considered at the federal, state, local, and utility levels.
1. Chadbourne & Parke (2009). “Trends in Tax Equity for Renewable Energy,” Project FinanceNewsWire, January 2009. Accessed at http://www.chadbourne.com/files/Publication/810dde603c784a9ac5da5fae8014b4f/ Presentation/PublicationAttachment/51fc06c5140748ac9dffa605de0f58e1/pfn0109.pdf
2. Cory, K.; Bolgen, N.; Sheingold, B. (2004). “Long-Term Revenue Support to Help Developers Secure Project Financing,” paper for Global WINDPOWER 2004, March 28-31, 2004. Accessed at http://www.masstech.org/renewableenergy/green_power/MGPPpaperAWEA.pdf.