WC Archive

The world's biggest solar power plant went online in Mulhausen, Germany this month, putting out 6.3 megawatts of power. The plant is part of a set of facilities in Bavaria which produce a total of 10 megawatts of power using 57,600 silicon solar panels, built by the Berkeley, California, PowerLight corporation. (PowerLight also built the solar array on top of San Francisco's Moscone Center.) Another 10 megawatts will be coming online soon in a four-location project funded by Michelin. Beyond solar, Germany is also the world's leading producer of wind power, with over 16,000 windmills; power generation capacity from wind amounted to 14,609 megawatts in 2003, up from 334 megawatts in 1993. Renewable power sources currently produce more than 10 percent of the nation's energy, a level which is supposed to double by 2020 and reach 50% by 2050. It will likely improve faster that that -- as of projections from 2000, the 10% point wasn't supposed to happen until 2010.

This explosion in the use of renewable energy has been driven by the German Renewable Energy Law (EEG), passed in 2000 and updated earlier this year (PDF). The EEG guarantees that, for a limited time, the nation's electric utilities must buy all wind, solar and other renewable power at a price per kilowatt-hour higher than that of power generated from coal, nuclear or natural gas. Currently, the rate for solar is ten times that of traditional energy sources. Interestingly, the law stipulates that the utilities must buy the power whether generated by commercial, industrial or residential generators. This contrasts to the situation in places like California, where residences with solar connected to the grid can zero out their power bill, but don't receive payment for power fed into the grid.

As noted, these higher prices aren't set in stone. Recognizing that improvements in technology will drive generation costs down, the tariff bonuses paid to solar, wind and biomass will decline gradually over time. For onshore wind, the bonus period is five years; for offshore, it's twelve. Solar, which isn't yet as close as wind to being fully-competitive, gets twenty years. In addition, the added tariff for solar will not apply to any facilities built after the national installed solar capacity gets to 350 megawatts; this tariff structure has the effect of encouraging solar power installation as early as possible in order to take advantage of the higher rates. The rate structure is also divided up by size, with higher rates generally going to smaller facilities, expressly to encourage the development of diverse, decentralized power production. (A detailed analysis of the 2000 version of the plan is available here.)

Germany's economy is still shaky from the integration of East Germany, and while 80% of the German public supports Germany's active participation in the Kyoto regime, higher energy prices (which include an added 3 euro cents per liter gasoline tax) aren't very popular. This law is very much an investment in the future. Likely economic benefits of the EEG may take some time to come: carbon credits to sell to less-aggressive nations; expertise in renewable technology implementation; and possibly the most important, insulation against price shocks as oil becomes harder to find and the negative effect of fossil fuels becomes even more obvious.