Craig Morris | Renewables From the Bottom Up

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    Renewables From the Bottom Up
    By Craig Morris
    t r u t h o u t | Perspective

    Tuesday 29 January 2008

While Germany empowers citizens, the US protects corporations.

    If you live in the US, do your power provider a favor: spend $20,000 putting solar panels on your roof. Then your poor utility will not have to buy so much power on the expensive spot market. Your utility may even thank you by taking some of the solar power you generate off your hands for free!

    Not tempted? Obviously, this arrangement (called "net-metering") is good for utilities, and we would expect solar advocates to oppose it. Just do the math: the utility benefits from your investment, not you. In net-metering, you offset your consumption; the power meter sometimes runs backwards. Your retail electricity rate may be around 10 cents, but since you are generating most of your power in the afternoon your utility may be saving big money by buying from you rather than on the spot market during peak consumption. In other words, your solar panels not only offset your own consumption, but also peak power for your utility. If you got paid the spot price for your solar power, your investment in solar might eventually pay for itself. At the retail rate, it never will.

    Why do US environmentalists not criticize this scheme? First, they would have to admit that solar still costs several times the retail rate in most places, making it harder to explain that solar pays for itself if seen as peak power even without environmental considerations. (In fact, you, dear reader, may even be having a hard time understanding the message now.) Second, US solar advocates spent a lot of time getting utilities to accept solar in some way, and net-metering is the compromise they reached. It is thus their baby, and they will fight to protect it.

    Utilities also like net-metering because it imposes an artificial cap on the size of systems. In other words, it keeps the competition small. If your meter runs backward for the year, you may not even get the full retail rate for the excess power you produced, if you get anything. So if you conserve electricity at home, make sure you do not put too many panels on your roof lest you get nothing for your investment.

    No wonder solar is moving slowly in the US. What we need is fair competition between energy providers and citizens - as cloudy Germany has. As a result of different legislation, Germans are not only the world leader in wind power, but also in solar, and their biomass sector grew by 55 percent in 2006. They don't use net-metering for solar or a tax credit for wind as we do. Rather, the secret to their success is that they empower citizens to compete with utilities eye-to-eye.

    Remember deregulation? Where we failed, Germany succeeded. Since 1999, Germany's electricity and gas markets have been "liberalized," i.e. open for competition not only between corporations, but between corporations and citizens. Retail rates have remained stable, not skyrocketed, and there have been no rolling brownouts. On the contrary, Germany has only around 20-30 minutes of power outages on average each year - among the lowest blackout figures in the world. Renewables now make up 13 percent of the country's electricity supply - and this share is rising by around two percent per annum.

    The German system does not pander to the vested interests of powerful utilities. Rather, utilities have to pay citizens a "minimum price" (floor price) set by the government for renewable power. The price is based on what power from a typical renewables generator would cost (cost of system divided by probable output); the retail rate on which net-metering is based is irrelevant here. Germans need only make sure that their systems are well designed and properly installed to turn a profit on their investments.

    To Americans, Germany's "minimum-price" scheme sounds like state regulation and price controls. We prefer things like tax credits for wind because we want to reduce state intervention in "free" markets. But in practice, our policies merely serve to protect the monopolies of utilities. In wind energy, our Production Tax Credit is mainly something that profitable corporations can benefit from; after all, the larger your profit, the more you benefit from a tax credit.

    As a result, the US has the largest wind farm in the world, almost eight times larger than Germany's biggest, though Germany has twice the installed windpower capacity. In contrast, German communities often come together to put up a handful of wind turbines, often on farms, funded by citizen co-ops. In the US, if wind farms are installed on farmland, chances are that a company like John Deere funds the operation because only a profitable corporation can take full advantage of the tax credit. Americans have a hard time investing directly in wind as Germans do because corporations, not communities, decide where wind turbines are put up in the US.

    Although Germany's minimum-price scheme unleashes citizen involvement in the renewables revolution, Americans think US policies are better market mechanisms. The American Wind Energy Association approvingly writes that government involvement in US Renewable Portfolio Standards is "limited to certifying Credits, monitoring compliance, and imposing penalties if necessary." Sounds good, but Germany's market mechanism does without credits, monitoring and penalties altogether. Germans do not need to plead with their utilities to invest in renewables; they just buy systems and expertise on the market and become profitable power producers themselves.

    So here we have the real reason why the US will not adopt minimum pricing: we let corporations run the country. The German system places a priority on renewables; distributed green power producers force utilities to ramp down their central power plants. You have priority over your utility.

    In December of 2005, the EU Commission declared the obvious: the minimum-price policies used in Germany, Spain and Denmark are more successful than the quota schemes used in Britain (and the US). Smaller than Texas, Spain has more wind power than the entire US. Britain, with the best wind conditions in Europe by far, has a tenth of Germany's installed capacity. Did I mention that the British "market-based" system involves a system of "submissions", "approvals" and "refusals," none of which exist in Germany? Check out the BWEA's website for yourself: http://www.bwea.com/statistics/2006.asp. And while the US installed more wind power in 2006 than any other country, we only matched Germany's annual average since 2001.

    Polls repeatedly show that people all over the world want renewables more than coal, gas, oil and nuclear. Germany allows ordinary people to put their money where their mouth is. So, my fellow Americans, when will we switch?


    Craig Morris is the author of "Energy Switch: Proven Solutions for a Renewable Future" (2006). He can be reached at http://www.petiteplanete.org/.
Last modified on Monday, 21 April 2008 16:17