Energy Policy in Germany and the U.S.: Two Paths, But Only One Success Story

Prof. Christoph Stefes – Source: Ecologic Institute

Germany often sets the example in the renewable energy policy field. Last week, the tradition continued as Professor Christoph Stefes from the University of Colorado at Denver and the Ecologic Institute in Berlin, and Professor Frank Laird from the University of Denver, praised German policies during a presentation at Ecologic’s Washington office. Their message was clear: Germany’s renewable power generation is skyrocketing while the U.S.’s stagnates.

This hasn’t always been the case. Prior to 1990, renewables followed similar paths in Germany and the United States. Yet Germany was able to make good use of a window of opportunity that opened up in 1990–92, while the U.S. stumbled. During this period, not only did renewable energy sources gain more credit and public support following the 1986 Chernobyl nuclear accident, but Germany’s political system also faced an upheaval due to the nation’s reunification.

The result of this divergence in paths is now obvious. In absolute terms, U.S. total renewable power capacity in 2009 was greater than Germany’s (52 and 42 gigawatts, respectively, excluding large hydropower). However, renewables represented only 8 percent of the total U.S. energy supply, and only  2.5 percent if hydropower is excluded. By contrast, Germany had a 10.3 percent share of renewable energy in its final gross energy consumption (including hydropower). And while the United States has few long-term federal renewables goals (the American Recovery and Reinvestment Act (ARRA) of 2009 contains several short-term targets), Germany aims to further boost its renewables share in its final gross energy consumption to 30 percent by 2030, and be 50 percent of its electricity generation within the same time period.

Share of renewables in power generation – © Frank Laird and Christoph Stefes

What triggered the strong growth of renewables in Germany? Professor Stefes believes that the first German renewables policy — the Renewable Energy Act of 1991 (Stromeinspeisunggesetz) — happened “by accident.” After the country’s reunification, the largest energy suppliers had other things in mind than renewables’ deployment, including kickstarting conventional businesses in the former East Germany. However, the conventional energy sector — and especially the nuclear industry in the wake of Chernobyl — became increasingly discredited. Renewables, meanwhile, gained favor thanks to the growing green movement. Consequently, the seemingly insignificant 1991 renewables bill appeared to be the least of utilities’ worries; they could not imagine its future impact — hence the accident theory.

Professor Stefes also emphasizes the congruence of several elements that, together, paved the way for Germany’s renewables success. As windmills began popping up along the A3 — the autobahn running from the Netherlands to Austria, via Germany — a professionalization of the renewables lobby occurred. Interest groups managed to speak with one voice, which was heard by the Ministries of Economics and Technology as well as the Ministry of the Environment. These ministries financed large campaigns and economic studies to highlight the benefits of renewables, which included their contribution to a dynamic green industry and the creation of a lucrative export sector. The gamble proved right: in 2000, roughly 300,000 people were employed in the German renewable energy industry, and 200,000 more are expected by 2050. Economic gains were successfully converted to political gains.

Prof. Frank Laird – Source: LSE

Why, and when, did the U.S. miss the boat? Professor Laird points to two main factors. The U.S. window of opportunity opened in the early 1990s because of changes in the oil sector. Two events — the Exxon Valdez oil spill in Alaska in 1989 and the Iraqi invasion of Kuwait in 1991 — highlighted the vulnerability of the oil supply. In response, the United States focused on energy security, resulting in a major, top-down energy policy review under President George H.W. Bush: the Energy Policy Act of 1992. Renewable energy was not totally out of the picture — the bill authorized R&D programs for renewables — but these were never sufficiently funded. Hence, rhetorical support was shown but no real implementation occurred.

Second, renewable energy lacked unified support in the United States and faced a far more powerful fossil fuel lobby. Still today, great divisions remain within the U.S. renewables sector. For instance, the solar industry is scattered among the Solar Energy Industries Association, the Solar Electric Power Association, the American Solar Energy Society, and numerous additional associations at the state level. At the federal level, most environmental lobbies have focused on establishing a cap-and-trade emissions trading scheme, rather than on fostering renewable development within the existing regulatory framework.

Professor Laird observes that the top-down approach of U.S. energy policy, combined with the disorganization of the various actors, has led to continuance of the status quo. Lately, renewable portfolio standards have been flourishing at the state level, but few incentives are being implemented at the federal level. The ARRA stimulus package has allocated some resources to the energy sector, including to renewable energy, but this is only short-term and cannot be considered a long-term policy of the same coherence that Germany has demonstrated over the years.

Professors Laird and Stefes’s presentation was based on the following article: Frank N. Laird and Christoph Stefes, “The Diverging Paths of German and U.S. Policies for Renewable Energy: Sources of Difference,” Energy Policy, July 2009, pp. 2619–29.

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