Why Is the U.S. Losing the Green Race? The German Solution: Feed-In Tariffs

Americans pride themselves on being global leaders in innovation. So why is the nation lagging behind China and Germany on renewable energy?

wind farm in Germany
Pool photo by Nigel Treblin A wind farm in Borkum, Germany.

You do not have to believe in global warming to support renewable energy. There are many good reasons to bet your money on renewables (to name just a few: national security, job creation and the finiteness of fossil fuels). But how do we get to a green economy?

For now, the United States is a good example of how not to get there. While some states have set ambitious goals for the expansion of renewable energy, a concerted effort at the federal level is missing. Instead, the Obama administration has continued to rely on an already existing patchwork of tax breaks, loans and research and development spending that has done little to provide entrepreneurs with a nurturing investment environment. In a market that is so heavily tilted in favor of conventional energy sources, governments need to provide some reassurance to investors in green technology.

In contrast to the U.S., Germany has for two decades relied on a comprehensive policy instrument to promote renewable energy: feed-in tariffs. This model requires utilities to buy electricity from renewable energy operators at a fixed rate that is guaranteed for 20 years, providing entrepreneurs and banks with a stable investment environment. Since introduction of the first feed-in tariff in 1991, the share of renewables in the electricity sector has increased from less than 5 percent to about 20 percent, with 30 percent envisioned by 2020 and 80 percent by 2050. Renewable energy has thereby become a boom industry, employing around 300,000 workers today, with 500,000 expected by 2020. Utilities have passed on the extra costs to the end consumer. Yet consumers’ electricity bills have increased by less than 5 percent because of these tariffs, and customers have had no major objections.

Can the U.S. emulate the German success story? It would certainly be difficult. The tariff model had an advantage in Germany, because it was introduced when its major opponents (large utilities, energy-intensive industries and the Ministry of the Economy) were distracted by the challenges of German reunification. Today, the opponents of renewable energy are on high alert in all industrialized countries, making it all the more necessary for proponents to unify their forces.

In Germany, the coalition behind renewables has been held together by the Ministry of the Environment. In the U.S., a strong federal agency that could serve as a focal point for renewables has yet to emerge. The ultimate goal of such a coalition is clear: the introduction of a federal feed-in tariff model, following the German example.

The New York Times


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