A principal part of the 25x’25 Alliance’s mission is highlighting renewable energy development from other parts of the world that can serve as examples of ways that we can expedite our own pursuit of a clean energy future in the United States. That’s why in recent years, 25x’25 leaders have traveled to Germany, a world leader in renewable energy, and met with policy makers and rural communities there to learn from a nation that has seen renewable energy grow from 6 percent of total energy consumption in 2000 to 25 percent today.
This week, 25x’25 released a report summarizing the findings from its most recent trip to Germany in late September of this year. The participants which included utility representatives and rural energy leaders, found that Germany’s renewable energy growth is measured by more than just statistics. These results are the work of innovative, incentive-based rate structures that are reflected all across the country where solar panels line barns and village homes, wind turbines dot the horizon and digesters provide heat to full communities. They also found that the transition has not required significant transmission upgrades, nor has it negatively affected the reliability of power (Germany had just 15 minutes of unplanned power interruptions in 2011).
Incentive-based rate structures, which include standard offer contracts, renewable energy dividends, renewable energy payments, and feed-in tariffs, have become the most widely used policies in the world for accelerating renewable energy development. Germany and other countries have shown that they not only increase renewable energy generation, but also improve local economic development by creating jobs and additional investment, especially within rural areas.
Still, support in the United States for incentive-based rate structures has been slow to develop, attributable to a number of challenges, including a lack of experience with these policy instruments among utilities. They may see the offer of “premium” prices to stimulate local renewable energy production as running at cross purposes to their mission of delivering affordable and reliable electricity.
However, the German experience – and even some implementation of incentive-based rate structures here in Vermont, Hawaii and Maine – shows properly designed policies can safely and affordable be used to accelerate distributed renewable energy generation.
Some takeaways from the fall stakeholder tour of German renewable energy facilities and projects include the acknowledgement that the country’s transition from a centralized to decentralized generation platform has yielded significant economic, national security and environmental benefits. Individual energy producers and rural communities have been major beneficiaries of this policy, with the majority of renewable energy production facilities owned by private individuals or farms.
German officials are quick to tell you that renewables are part of a larger strategy that is driving economic transformation in the country and that German ratepayers are willing to invest in and accept higher near-term energy costs in order to reduce future energy costs and create new economic opportunities.
The German policies were established via a national policy directive tied to a comprehensive, long-term energy security plan. The United States lacks such a plan and, given the current economic and political environment, passage of a national energy plan with specific goals and mechanisms for achieving goals is unlikely.
So, while the adoption of national policies within the United States similar to those of Germany is not recommended, opportunities do exist to integrate their core components (access to the grid, stable long-term purchase agreements, and payment levels based on the costs of renewable energy generation) into locally designed rate mechanisms that take into account the unique needs, opportunities, and goals of individual utilities and communities.
Policies supporting renewable energy development can serve as a smart, long-term investment vehicle for local communities. Local leadership has been the catalyst for transitioning to renewable energy and has evolved into a network of local energy cooperatives that are pooling community resources to invest in renewable energy and energy infrastructure that they could not afford as individuals. Since 2005, more than 80,000 citizens have set up around 600 energy cooperatives.
German policy has shown that by providing transparency, longevity, and certainty, properly designed renewable energy policies create the framework that enables private investors – through renewable energy credits, cooperative members and other mechanisms – to own, build and operate distributed energy generation.
U.S. policy makers at the federal, state and local level would do well to study the German experience. That country has successfully demonstrated that technical and policy challenges related to renewable energy can be overcome on the path to 25x’25, a vision that the Germans have already made a reality.