Nevertheless, interest in feed-in tariffs is growing in the United States. At least two cities–Sacramento, CA, and Gainesville, FL–have enacted local plans. California, Hawaii, and Vermont have passed laws that would create their own feed-in tariffs, and at least 15 other states have considered it.
What might these policies cost? In Germany, electricity prices have soared more than 60 percent over the past decade. But Germany’s environmental ministry says the tariff system is responsible for less than a 10th of that increase, or about $3 per month for a typical household. Since German households consume about half as much electricity as U.S. homes, the extra cost for renewable energy has not been a deal-breaker for the public, says Kemfert, who contends that a majority of Germans support it. Overall, the tariff cost Germany an estimated $11 billion in 2008 alone, about a third of 1 percent of its GDP.
But why even bother with feed-in tariffs? Many economists favor either a carbon tax or a cap-and-trade system in which electricity plants buy permits to burn fossil fuel. “It would be better to tax brown power than subsidize green power,” says Borenstein. Coal is the biggest carbon emitter among all energy sources, and it currently accounts for about half the electricity produced in the United States as well as in Germany. Phasing out coal should be the main goal, and pursuing that goal by putting a price on carbon, he says, allows the market to decide which renewable sources are most cost-effective. That’s more efficient than letting the government set prices.
However, neither cap-and-trade nor a direct tax may be politically feasible in the United States. So would a national feed-in tariff be an acceptable alternative? Or would it also be politically doomed, since it, too, would raise electricity prices? To make a case for it, politicians would need to convince the American public that renewable power is worth it, pointing to Germany as the example. Indeed, the German experiment does show that a large industrial society can reach ambitious goals for scaling up new sources of clean electricity, with users paying the way. Germany expects to produce most of its electricity from renewable sources by 2030. Meanwhile, the United States produces only about 7 percent of its electricity from such sources, most of that from long-standing hydroelectric plants.
The real significance of the German plan, though, may not be as a model for other countries but as a source of permanent change in the world’s energy economy. In this sense, Germany can be compared to early adopters of new gadgets, who often pay outrageous prices even though they know that others will get improved technology for much less a few years later.
Consider the changes in the market for wind power. By 2006, Germany had by far the largest wind-power base in the world, with 20.6 gigawatts of capacity. The massive scale brought the cost down, and wind began approaching grid parity in many parts of the world. In 2009, the United States and China were able to surpass Germany in capacity, but at far more attractive prices.
Thanks in part to the Germans, the same thing now appears to be happening in solar, with prices of photovoltaic panels plunging 40 percent last year alone. Yes, the critics are right that Germany’s spending was wildly inefficient. But what Germany did was prime the global markets, showing that renewable technologies can be a big business worthy of investment. As a result, the United States may not need to copy Germany’s experiment to reap the rewards.
Evan I. Schwartz is an author and journalist. He produced and cowrote Saved by the Sun, a PBS/NOVA documentary featuring a segment about the German solar policy.