NEW ENERGY F I N A N C E S E R I E S Part V December 16, 2009 Denver, Colorado

1. NEW ENERGY F I N A N C E S E R I E S Part V December 16, 2009 Denver, Colorado

2. Renewable EnergyDevelopment in Germany: Lessons for the United States

3. Presented by: Christoph H. Stefes, Ph.D. Associate Professor, Department of Political Science Director, Bachelor in International Studies Program University of Colorado Denver PH: 303.556.2748 E-mail: christoph.stefes@ucdenver.edu

4. Renewable Energy:A German Boom Industry

5. Growth Engine

6. Revenues in Comparison Total revenue RE sector: 33.6 billion USD (2006) In comparison: • Car industry: 351 billion (2006) • Chemical industry: 209 billion (2006) • Pharmaceutical industry: 24 billion (2006)

7. Export Weltmeister • Germany is one of the biggest exporter of wind turbines and solar panels in the world (German Enercon is among the top three wind turbine producers in the world) • In 2006, 74% of total revenue was made through exports. • In the current worldwide RE boom, German RE industry is well positioned to reap major gains

8. German RE Exports(in billion Euro)

9. Job Engine4x more jobs in 10 years

10. Employment in Comparison 2006: 235.600 – Tendency: ↑ (most new jobs created in East Germany) In comparison: • Car industry: 750.000 (2006) • Chemical industry: 436.000 (2006) • Pharmaceutical industry: 95.000 (2006) • Tendency for all three sectors: ↓ (most jobs still in West Germany)

11. Saving the Environment

12. At what costs? The feed-in tariff increases the price of electricity for the household customer by around 5%.

13. The Future

14. The EU Dimension

15. Explaining the Success StoryThe Feed-In Tariff: From StrEG to EEG StrEG: Stromeinspeisegesetz (Feed-in Tariff Law) EEG: Erneuerbare Energiengesetz (Renewable Energy Law)

17. StrEG Provisions • Purpose of StrEG: to level the playing field for RE and make RE competitive • Requires utilities to connect RE generators to the grid • Requires utilities to buy RE at rates ranging from 65%-90% of average electricity tariffs • Focus is on wind and small hydro (under 5 MW)  purpose is to strengthen small RE generators and keep large utilities out

18. StrEG Shortcomings • Rates varied depending on electricity prices (which dropped in Germany in the 1990s due to liberalization of European energy market and aggressive takeovers) • Rates too low for solar and other RE sources • No sharing of costs – northern utilities took the brunt  legal challenges and introduction of 10% feed-in limit

19. Policy Reform: EEG • Fixed, long-term payments (20 years) • Rates differentiated by technology and generation cost • Declining incentive structure • Preferential grid access for RE • Costs are evenly spread among utilities • Utilities and their large-share RE operations are no longer excluded from benefits • Currently, in place in 18 EU countries • Diffusing rapidly around the world (and even under considerations or already implemented in some US states, including CA, NY, NJ, MA, WI, and OR)

20. Flanking Policies • R&D spending, some tax incentives, and access to publicly subsidized, low-interest credits • Eco tax (carbon tax)  making fossil fuels more expensive • Public information campaigns • Aggressive export promotion (e.g., foundation of German Energy Agency, DENA) • Germany as a promoter of RE in Europe and the world

21. The Politics of German RE:Flying Under the Radar • Policy Window: Chernobyl, legal challenges against coal subsidies • StrEG as an “accident” – major opponents distracted (German reunification)  backbenchers in German parliament push through StrEG

22. The Politics of German RE:Releasing the Genie Out of the Bottle • StrEG turns wind energy into a bridgehead for other RE sources (RE as a “real alternative”) • Growth of a strong RE advocacy network (environment ministry, parliamentary groups, RE industry groups, mechanical engineering association, some labor unions, environmental groups, church groups)  repel legal and political attacks from large utilities, association of German industry, and economics ministry

23. The Politics of German RE:Breakthrough – 1998 Parliamentary Elections • Red-Green government introduces eco tax and EEG • Greens take over environmental ministry and make it a pro-RE bastion against economics ministry onslaughts • Acknowledging RE’s economic potentials, successive governments (Black-Red, Black-Yellow) continue support for RE through EEG • Path is set and probably irreversible

24. US and Germany in Comparison

25. US: Missed Opportunities

26. Policies: US and Germanyin Comparison • US (federal level) • Main policy instrument for promoting RE are tax breaks. • Insufficient, short-term, unreliable  fails to create predictable investment environment. • US (state-level, e.g. Colorado) • Renewable Portfolio Standard (20/20) • Requires utilities to increase share of RE to 20% by 2020

27. FIT vs. RPS RPS • Predictable, rather than anarchic, market growth • Minimizes costs to taxpayers and/or ratepayers through increased competition among developers • No picking technological winners • Market-based system of tradable credits • Projected costs minimal FEED-IN • Investor confidence • Rapid deployment in response to national targets and climate change • Creates local manufacturing and jobs • Transparent and lower administrative costs • Shifts competition to equipment market • Encourages geographic distribution • Projected costs minimal

28. In short… • Feed-ins “achieve larger deployment at lower costs.” Nicholas Stern, Former Chief Economist for the World Bank • RPS has “high expected annuity of support (and therefore high costs for consumers) but low growth rates.” Fraunhofer Institute for Systems & Innovation Research and Vienna University of Technology

29. Lessons for the United States? • Beyond state-level RPS • Towards a federal FIT Model • Art. I, Sec. 8 of the US Constitution provide Congress with sufficient authority to take the lead in promoting RE at the federal level.

30. Thank you! Questions?