Some utility executives think German approach won’t work nationally in U.S.
Posted on July 28th, 2008By Christa Marshall
Climatewire: A national law that fueled a solar boom in Germany has problems as a policy model for the United States, according to two utility representatives who recently returned from a five-day tour of the European country.
A different business and political culture in America makes the idea of a federal feed-in tariff, which would require utilities to buy renewable electricity from private developers at premium rates set by the government, a challenging prospect, the executives from Duke Energy Corp. and Puget Sound Energy Inc. explained.
“The feed-in tariff largely was an economic development tool for Germany, rather than an energy policy,” said Kimberly Harris, chief resource officer for Puget Sound Energy. She was one of 31 utility executives who went on a fact-finding mission to Germany at the behest of the Solar Electric Power Association (SEPA), Washington State University and the World Future Council.
Germany recognized it could create high-paying jobs and become a solar export powerhouse by selling the technology to Spain, Italy and other countries, Harris said. In the United States, the initial impetus is more environmental than financial, and the consumer culture is different, she said.
Utilities, for example, are driving some of the push for solar in the United States and are wary of acting as tax collectors via a tariff, she added. Companies such as Duke Energy are seeking opportunities to own their solar projects, said Duke’s company director of regulated renewables strategy, Owen Smith, noting a trend that is very different from the operation of feed-in tariffs.
“[Germans] ask, ‘Where will we get our energy?’ [Americans] ask, ‘Can renewables ever meet our energy needs?’” said Craig Morris, author of “Energy Switch: Proven Solutions for a Renewable Future,” who gave a presentation to the utility travelers.
Germany’s experience developing solar has encouraged state efforts in U.S.
Despite the skepticism, the association released a report this week and a survey indicating that 18 utility employees were “neutral” or “in favor of” feed-in tariffs after the trip. The poll numbers are not entirely surprising, as some of the executives who expressed wariness about the idea didn’t rule out the mechanism being used at the state level.
In Germany, feed-in-tariffs started locally in cities like Aachen and spread from city to city before they took hold nationally, creating a potential model for the United States in the same way that renewable portfolio standards have spread, said Mike Nelson, director of the Northwest Solar Center at Washington State University, who traveled with the utility representatives.
He said the tariff could provide price certainty to investors and help to solve the transmission problem associated with renewables, as it makes it cost-effective to install a small number of generators near the source of power demand.
Renewable portfolio standards, which mandate that utilities produce a certain percentage of power from alternative energy sources, also have a disadvantage compared to feed-in tariffs, in that they push generators to get the cheapest renewable energy, even if it’s not the best long-term option for a region, said Ed Regan, assistant general manager of Gainesville Regional Utilities in Florida.
Currently, more than two dozen U.S. states have adopted renewable portfolio standards, while a much smaller number have considered feed-in tariffs. Rep. Jay Inslee (D-Wash.) recently introduced a bill incorporating a national feed-in tariff, but acknowledged the difficult political environment on Capitol Hill for the proposal (ClimateWire, June 19).
Regardless of the ability of the tariff idea to gain acceptance in the United States, several of the executives said their exposure to Germany’s widespread solar installations — despite the country’s relative lack of sun — had changed their minds about the possibilities for the technology in America.
In the state of Bavaria, in particular — which has many “conservatives eager to benefit financially” from the feed-in tariff, according to Nelson — up to 20 percent of electricity is provided by solar energy on a sunny day.
In post-trip surveys offered by SEPA, three utility executives changed their minds and said their companies were more likely to “seriously engage” in solar in the next year. An additional five said solar was a “major opportunity” for their utilities.
For Harris, the trip pushed her to take a closer look at the possibility of solar panels on the rooftops of commercial buildings, an area she said is untapped and in need of inventory and a potential program. Because of incentives from Washington state, 300 residential customers of Puget Sound Energy have installed solar, a doubling since 2005.
The United States should also examine how Germans integrate solar panel into their architecture, she said.
“They don’t construct a building and then plop a panel on top of it,” she said.
U.S. hurdles include higher prices, complex regulations, fickle tax incentives
Last week, a technology expert from Europe said the United States could surpass Germany and Japan in solar capacity if current government incentives remain in place (ClimateWire, July 16).
In Germany, Regan said he was struck by how far production costs have dropped for solar manufacturers at the same time as they were able to squeeze more juice out of each photovoltaic system, a sign of the cost benefits of implementing something at a large scale.
But as SEPA notes in its report, the United States presents a unique set of obstacles in comparison to Germany.
Beyond uncertainty about a federal investment tax credit assisting solar, Germany’s wholesale and retail electricity prices are both high by U.S. standards, the report says.
The United States also has more variation from state to state and from town to town in requirements for solar power, creating an obstacle for developers trying to navigate the paperwork and regulations of the renewable landscape, said Smith, whose colleague Tracy Beer took the trip.
When asked about plans to do business in the United States, several solar developers in Germany pointed to complicated electrical regulations as a problem that keeps them out of the American market.
“For example, in the U.S. buried electrical cable must be less than 600 volts and sheathed in conduit, while in Europe 1000 volt cables can be buried and marked without conduit, decreasing losses and system costs,” they say in the report.
Executives on the trip included representatives from a range of state utilities, including Arizona Public Service, Duke Energy, Pacific Gas and Electric Company, Portland General Electric and American Municipal Power-Ohio.