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October 22, 2009

Germany, leader in renewable energy

Jennifer Taylor, Valerie Kitchell and Julia Balabanowicz

BerlinEnacted in 2000, Germany’s Renewable Energy Sources Act (EEG) is proving to be the world’s most effective and efficient instrument for stimulating the renewable energy market and reducing greenhouse gas emissions.

Currently, renewable energy comprises 14 per cent of Germany’s total electricity use and the industry employs over 235,000 people.

Reductions in the country’s carbon dioxide (CO2) emissions, 44 million tonnes in 2006 alone, and substantial domestic manufacturing, worth more than $21-billion in the same year, are directly attributable to the EEG.

Furthermore, the EEG has reduced Germany’s need to import energy and
helped it avoid external costs associated with CO2 emissions.

Amendments to the EEG passed in 2008 added incentives to repower or replace older technology with more advanced versions of offshore wind in order to avoid market saturation, increase generation capacity and support development of innovative renewable technology.

At the heart of the EEG are advanced renewable tariffs, a policy mechanism that experts agree is the most efficient, effective and egalitarian means of accelerating the deployment of renewable energy.

Advanced renewable tariffs allow the connection of renewable sources of electricity to the grid and specify how much generators are paid per kilowatt-hour (kWh) for their renewable electricity.

The key features of advanced renewable tariffs include:

• tariffs differentiated by technology, the size of the project and the productivity of the resource;

• project reviews every three years to determine whether the tariffs are appropriately priced;

• long-term investor security through guaranteed grid connection; and

• fixed tariffs for a period of 20 years.

Although federal legislation influences renewable energy markets in Germany, in Canada the action is at the provincial level.

Ontario is the first North American jurisdiction to establish a feed-in tariff in the last 20 years.

Similar to Germany’s advanced renewable tariffs legislation, Ontario’s Renewable Energy Standard Offer Program (RESOP) offers premiums differentiated by technology and involves 20-year contracts between generators and the Ontario Power Authority.

However, key elements that contributed significantly to Germany’s success – priority grid access for renewable energy generators and tiered pricing, in particular – have not been replicated in RESOP.

These omissions are hindering its potential to encourage the rapid deployment of renewables across the province, especially at the community level.

It is important to note that Germany’s federal government has been obliged to expand its renewable market due to the European Union Directive 2001/77/EC, which aims to increase the share of electricity generated from renewable sources in the EU to 21 per cent by 2010.

This approach could be replicated in Canada in the form of federal binding targets, which would stipulate the overall goal for the country’s share of renewable electricity, but would leave the means of attaining these targets to the provinces’ discretion.

This is essentially what has occurred in Europe, with the directive allowing each member state to apply what it deems to be appropriate instruments.

Canada’s focus on tar sands development and investment in carbon capture and storage technology, when coupled with the fact that electricity falls under provincial jurisdiction, makes establishing provincial programs such as RESOP the best way forward.

It is likely that as public support for renewable energy increases, the federal government will transform Canada’s energy economy by implementing nationwide renewable energy targets.

Julia Balabanowicz, Valerie Kitchell and Jennifer Taylor are pursuing their master’s degrees in environmental studies at York University.

Reprinted from Taylor, Kitchell and Balabanowicz, "A Fine Act to Follow," Alternatives, 34:6 (2008). Used with permission from Alternatives Journal. Subscribe today at www.alternativesjournal.ca.

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