Opting for renewables
According to IEA’s factsheet, Renewables in global energy supply, the wind energy sector has grown at more than 52 per cent per annum since 1971, and solar power by 32 per cent per annum. Renewables in 2000 accounted for 13.8 per cent of the world’s total primary energy supply (electricity, heat, transport fuels, commercial and non-commercial energy). Combustible renewables and waste (97 per cent biomass) comprised 80 per cent of total renewables, followed by hydro power (16.5 per cent). (see pie chart: Can grow)
“Renewables are the second largest contributor to global electricity production. They accounted for 19 per cent of production in 2000, after coal (39 per cent) but ahead of nuclear (17 per cent), natural gas (17 per cent) and oil (8 per cent). Most of the electricity generated from renewables, however, comes from hydro power plants (92 per cent) followed by combustible renewables and waste (5 per cent). Geothermal, solar and wind accounted for less than 3 per cent in 2000,” says the report. Due to high share of biomass in total renewables, non-OECD regions like Asia, Latin America and Africa are the main renewable users. OECD countries used 70 per cent of new renewables like wind and solar in 2000.
Renewable energy can’t become the world’s powerhouse unless governments stop subsidising fossil fuels and promote policies that encourage investments in renewables. Governments across the world have been experimenting with various schemes to encourage renewables (see: The world: set to surge?). Germany’s feed-in-tariff system increased the share of renewables in the country’s total energy supply and decreased the cost of wind energy turbines. UK wasn’t very successful when it first experimented with tenders, but it expects a lot from the new promotion system of renewable obligation. The experience of these two countries shows the intricacies of promoting renewable sources.
The German way
Between March 30 and April 4, 2004, the German government took two completely opposite decisions regarding the energy sector. Following a European Union directive (2003/87/EC) on emissions trading, the German government on March 30 announced its ‘national allocation programme’ to reduce carbon dioxide emission. As part of this directive, member states had to submit national allocation plans detailing the carbon dioxide emissions targets they would achieve by 2007 and 2012. Germany’s ministers fought hard: the economics minister wanted low reduction targets and the environment minister higher ones. Neither was willing to budge, and agreement was reached only after Chancellor Gerhard Schroeder intervened.
Experts say this agreement is “not very ambitious”: economics has won over environment. According to Germany’s allocation plan, it will reduce emissions from the current 505 million tonnes of CO2 to 503 million tonnes by 2007 and 499 million tonnes by 2012. “This is a very bad plan. At times, the influence of coal lobby is amazing,” says Danyel Reiche, of the Environment Policy Research Unit, Free University of Berlin.
The allocation plan seems to be industry’s victory over environment. But it is not. The plan is a compromise between industry and environment. This was proven when on April 2, 2004 the German parliament approved an amendment to the Renewable Energy Sources Act of 2000 (Erneuebare-Energien-Gesetz or EEG Act) guaranteeing a higher and fixed feed-in-tariff for many renewable energy resources. It is seen as the next big step in encouragement. “This is a typical German compromise. Within the same week they passed a plan to promote coal (national allocation plan) and also made a very nice law for the renewable sector,” says Reiche.
According to the German Federal Ministry for Environment, Nature Conservation and Nuclear Safety, the feed-in-tariff system has greatly encouraged renewable energy. By 2002-end, the sector comprised 9 per cent of the electricity produced in Germany; by October 2003, about 50 per cent of the world’s installed wind energy capacity was in Germany. It leads the world in the sale of bio-diesel (with a share of 2.5 per cent in the German fuel market) and has the second largest installed solar photovoltaic capacity in the world. All this in just 14 years.
LAW, LOANS AND POLITICS: Germany started encouraging renewable energy in 1974, but it was in 1991 that it gave the sector the greatest push. In this year, the Act on Supplying Electricity from Renewables (Stromeinspeisegesetz, Str EG) came into force. This act “obliged public energy utilities to purchase and pay for electricity from solar and wind energy, hydropower, biomass, sewage and landfill gas on a yearly fixed basis,” write Mischa Bechberger and Reiche of the Free University of Berlin in Renewable energy policy in Germany: pioneering and exemplary regulations, in the March 2004 issue of Energy for Sustainable Development. After Str EG was enforced, installed wind capacity in Germany grew almost a hundred times within a decade: from 48 megawatt (MW) in 1990 to 4,443 MW in 1999. The cost of producing electricity from wind technology today almost equals the actual cost paid for electricity. While on an average a fixed tariff of 7.5 cents/kWh (US $9 c/kWh) is paid to power from wind, the average industrial electricity price is about 6 cents/kWh (US $7.2 c/kWh).
Renewable sources found their greatest supporter when the Green Party formed a coalition government along with the Socialist Democratic Party in 1998. One of its major achievements was an agreement, signed in June 2001, to phase out nuclear energy, which produces 30 per cent of Germany’s electricity, by 2021. Greens say renewable sources can fill the gap, but industry associations representing conventional energy say their fuels and imported gas can meet the shortfall.
Renewable sources in 2002 formed 2.9 per cent of the total primary energy consumption in Germany. In the renewables share, 49.2 per cent came from biomass, 22.5 per cent from hydro, 16.1 per cent from wind and just about 1.9 per cent from solar (PV plus thermal). For the electricity sector alone, renewables accounted for 7.6 per cent of the total electricity consumption in 2002, which was about 582 terawatt hour (1 Twh = 1,000 gigawatt hour = 1 billion kilowatt hour). Wind power contributed 2.7 per cent (about 15.8 Twh) of the total electricity consumption in the country while solar energy only 0.03 per cent (0.1 Twh). Coal contributed 51 per cent in the electricity sector and nuclear power 31 per cent.
EEG, A CLASS ACT: The Renewable Energy Sources Act of 2000 (EEG) aimed to at least double the share of renewables in electricity generation by 2010 from the baseline year of 1997. This means that at least 12.5 per cent of electricity would come from renewable sources by 2012. Unlike the earlier feed-in system, EEG guaranteed a fixed, declining or regressive feed-in-tariff for all the electricity produced. The tariffs are guaranteed for 20 years and they reduce with each year. The tariff for biomass reduces by 1 per cent each year, for wind 1.5 per cent and for PV 5 per cent. This would mean that a PV plant set up in 2004 would get a 5 per cent lesser tariff than the one set up in 2003. According to EEG, a grid operator cannot say no to renewable energy producers and has to give renewables priority over other sources.
The latest amendment to EEG encourages developing biomass-based renewable technologies (see: Farm to fleets: running on biogas in Germany). It gives a higher feed-in-tariff to biomass plants of lower installed capacity. The tariff keeps reducing as the plant size goes up. For example a plant less than or equal to 75 kilowatt installed capacity gets a feed-in-tariff of 12.5 cents/ kWh (US $15 c/kWh); while one of 5-20 megawatt gets 8.4 cents/kWh (US $10.1 c/kWh).
As a result of decades of reforms, in 1999 renewable electricity fed into the grid was to the tune of 8 Twh, it increased to 18 TWh in 2001 (4 per cent of total), and 31 TWh in 2003 (7 per cent of total). Total installed capacity for wind increased from 4,443 MW in 1999 to more than 14,000 MW by 2004
Impressive? Not to all Germans. Many say wind energy is erratic. “At a given time, feed-in from the entire wind capacity installed can be up to 2,139 MW less than the prognosis. This creates a huge problem because the gird operator will have to keep a reserve of 2,130 MW for balancing power. This is highly costly,” says Till Bohmer, head of the renewable energies section, German Electricity Association, VDEW, an electricity industry body. “For the installed capacity of 14,500 MW of wind farms,” adds Bohmer, “We need 13,000 MW installed capacity of conventional power as reserve to make up for the times when wind energy is not adequate.” But others disagree. “Industry exaggerates the amount of balancing power required,” says Heiko Stubner, staff member at the office of German parliamentarian Hermann Scheer.
The government pays no subsidy for the feed-in-tariff system; the extra cost is paid by the consumers. Certain energy intensive industries are exempted from paying the higher tariff under EEG. “As the electricity bill does not contain a break-up of the details
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