Germany has put itself on the world map in the past decade as an early adopter of energy generation from renewable sources. In 2013, 25% of the country’s energy came from renewable sources — the highest percentage in the world. By 2050, as part of the country’s Energiewende (or “energy transition”), Germany expects this number to be at 80%. This is an incredibly ambitious goal, as Germans and the rest of the world will agree, but the country is preparing now to make this happen.
As part of the Transatlantic Program hosted by the German American Chamber of Commerce, I had the incredible opportunity to meet with many of Germany’s energy influencers and to learn directly about how Germany is transitioning to carbon-free energy. It hasn’t all been smooth sailing, but there are key lessons that the U.S. and the rest of the world can learn from both Germany’s successes and its plans for improvements.
Consistent policy is critical
The Bundesnetzagentur in Bonn is Germany’s Federal Network Agency for electricity, gas, telecommunications, post, and railway, and it has many insights to share about the how such high rates of renewable penetration have been possible. In particular, the agency attributes this achievement to policy, and more specifically, to three aspects of the current renewable energy policy in Germany: guaranteed grid and market access for renewables, priority dispatch of renewables over conventional generators, and guaranteed financial support for twenty years through the feed-in tariff. These three attributes have provided great incentives for installers of renewable energy, paving the way in some cases for high profit as competition from solar producers caused panel prices to drop rapidly. This is a key lesson the U.S. can learn from Germany: consistent policy is critical for a similar large-scale transition to renewables, and it’s currently missing in our market.
Though policy incentives are often criticized, predictability of returns throughout the expected life of renewable equipment is essential in the early years for a transition of this size. With policies that are inconsistent or even disappear from state to state and year to year, individuals, businesses, and even utilities are hesitant about investment in newer technologies. Germany’s foresight on this front has resulted in solar capital costs that have reached grid parity — a great thing that much of the world can take advantage of as we follow suit.
Though the technology and progress enabled by the Energiewende is incredible to behold, it still comes at a cost. The renewable feed-in tariff is funded by ratepayers, and many in Germany agree that its implementation created excessive windfalls for some. Though the rate of the FIT is declining for new installations, projects that are already operational are still reaping massive benefits. With all of its ups and downs along the way, Germany is leading the world in the energy transition, and we can all learn from its experience.
This is an excerpt from an article from Katrina Prutzman leads the system design team at UGE and recently returned from the Transatlantic Program for Young Technology Leaders.