Whether Sen. John McCain or Sen. Barack Obama becomes our nations next president, the issue of environmental policy and domestic energy production is going to play a dynamic role in our nation’s future. The question that these two candidates will have to answer during their campaigns is, “How will your energy policy create a better future for Americans and the environment?”
So far, McCain has suggested adhering to free market principles with clean energy except for government subsidies for nuclear power and clean coal. He has also promised a $300 Million incentive to the producer of a high achieving car battery. Obama, on the other hand, has promised money. In his proposed budget, Obama is allotting $150 billion over 10 years to clean energy initiatives compared with McCain’s $2 billion annual promise to clean coal production (only number available on McCain’s Lexington Project site). Maybe the promise of free market principles or a lot of money can solve our energy crisis, but then again, maybe they won’t. For this sake, I am promoting specific energy policies that act proactively instead of reactively. My model is Germany’s EEG, Erneuerbar Energie Gesetz, or Renewable Energy Law.
The EEG began with roots in the 1990s where wind power alone was benefited, but the law really developed during its actual birth in 2000 to include almost every source of renewable energy. The policy is based on the principle of Feed-In Tariffs, which work by guaranteeing the sale of renewable energy by its producer to the utility. The catch is that the RE producer is guaranteed to sell the energy at above market rates determined by the law, which it then distributes evenly across its customers. In the end an average family pays an additional 2-3 euro on the monthly bill. This way, the tariffs don't punish the utility, and the higher cost is distributed among all of the consumers based on their consumption. These tariffs regress in amount in fixed increments that are specified by the EEG and specific to the type of renewable energy technology used. Therefore, more affordable renewable energy sources see a lower tariff than a more expensive RE technology.
Examples of these Feed-In Tariffs:
Both on- and offshore Wind Turbines are guaranteed a feed in tarif of 8.96 €cents for every kWh produced in 2002, which regresses to 8.83 €cents in 2003, and then 8.70 €cents in 2004. Similarly, Biomass (up to 500 kW) earn a feed in tariff of 10.13, 10.03, and 9.93 €cents/kWh for 2002 to 2004 respectively. From Geothermal to Hydropower to Landfill gas, each Feed-in Tariff is in the 6 to 10 €cents/kWh with one exception; Solar PV. For Solar PV panels (5 MW), the Feed-in Tariff is 48.09 €cents for '02, 45.68 €cents for '03, and 43.40 €cents for'04.
*It is important to note that the EEG takes measures to benefit smaller energy producers with high respective FiTs. So while a Solar PV producer of 5 MW earns a tariff of 43.40 €cents/kWh in 2004, a homeowner with a PV panel capable of producing 30kW/h can earn a tariff of 57.4 €cents/kWh. The difference is substantial enough to promote small ventures and private investment in renewable energy.
**Also, The EEG is guarantees these FiTs for 20 years, thus providing the security that entrepreneurs need to set up shop in a new industry. This long term legislation is part of the reason why Germany in experiencing surprising economic growth despite the global credit crunch. The first quarter of 2008 was the best in the past 12 years, expanding their economy by 1.5 % for the quarter (compared to the 0.6% GDP first quarter growth of the US).
The tremendous difference in the FiT for Solar PV is mostly because of the expensive price of a Photo-Voltaic panel. A fraction of it might just be to provide incentive to create the strongest solar industry, which brings me to my next point.
While the EEG provides a proactive policy for the benefit of all renewable energies, it doesn't mean that similar Feed-in Tariff legislation needs to be conducted in this same manner. While it is ideal to promote a number of RE technologies, this is impartiality is expected on a national level. In order to expect the same here in the US, this would mean waiting around for our federal government to pass a FiT policy. I am advocating that states, specifically Michigan and Ohio, beat the federal government to the punch. We should be viewing a proactive policy like the Feed-in Tariff as an impetus for economic growth.
Here is my proposal: Because of the hurting state of Michigan and Ohio's economies, the state legislators should be picky with which types of RE technology benefit from a FiT policy. For example, Ohio could choose to only promote a FiT for wind turbines, and guarantee is for 15 or 20 years, long enough to convince start-ups to choose Ohio. Why should Ohio choose wind and not solar or geo thermal? First of all, Ohio isn't exactly the sunniest state in the US, and I don't know of any existing infrastructure that could really take off given a friendly market. On the other hand, Ohio, specifically southwestern Ohio, more specifically Dayton, is home to one of the nation's best aerospace infrastructures in Wright Patterson Air Force Base. We are also home to what is possibly the nation's preeminent composite industry, a composite valley.
Michigan could probably also benefit from a wind focused FiT policy, but just in other ways. While we lack the aerospace and composite infrastructure that southwestern Ohio has, we have lake effect winds on the west coast of the state.
Okay, I'm no economic developer or legislator, so I'm sure that there are holes in my idea. Commenters, have at it. I want to know what everyone thinks. Bring your best criticisms, especially if you are an economist or legislator. Will FiTs work on a state level?
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6 years ago
11 comments:
This is a really good article, and I certainly wish that something like this could happen here in America. Call me overly skeptical if you will, but I just do not believe it would work in this country. Unfortunately, our American government, and the legal system which checks and balances it, is no longer institutions of by and for the people. The influence of lobbyists and other special interest groups really took off in this country during the so-called Reagan revolution, and their grip on government has only gotten worse over the years. Oh sure, every now and then we have a lobbyist reform bill, but nothing really ever changes. We no longer live in a country in which a bunch of intelligent well-intentioned people sit around coming up with ideas and passing laws. Congress, the White House, and the courts have become increasingly influenced by powerful lobbyists and think tanks. Senator Smith does not wake up in the middle of the night with a great idea, take it to the Senate floor, and propose a bill for the good of the people anymore. Nowadays, Senator Smith is wined, dined, and bribed by special interests, s/he takes the ideas posed by the special interests to the senate floor, and it goes from there. How do lobbyists achieve such power and influence? Money. Who has the money? Well, we all recall seeing the articles over the past year about the ungodly profits made by big oil. What do they do with that money? Besides giving their executives way too much money, they use a lot of it to buy influence. Or, to put it another way, they payoff lawmakers and judges. You may think that I am being cynical, and to an extent I agree that I am, but in the eight plus years that I have been practicing law in the great state of Michigan, I have seen this perversion of representative government at its worst far too many times. Going off topic for a bit, just to prove my point, the single most powerful lobby in Michigan is the Insurance lobby. As a result, we have laws and cases which have pretty much made it impossible to recover reasonable monetary compensation for a slip and fall, an auto accident, or a moldy house. Why? Because the Insurance lobby paid off the lawmakers to pass ridiculous laws, and influence the judges who interpret them. I could explain this in greater detail, but I highly doubt anyone here wants to read about it. Suffice it to say that we are living in an era of government where you cannot expect to get anything accomplished without a lot of financial backing. Point being that the environmental lobby is just not powerful enough to compete with big oil. Grassroots efforts are a wonderful thing, but in this country they will be crushed by special interests more often than not. My initial gut reaction is that if Michigan or Ohio were to propose such legislation, big oil would get someone to file a federal lawsuit, claiming that energy is commerce and commerce is the express domain of Congress. Sure we have renewable energy sources in this country, but they are merely window dressing to divert the will and intention of the people. The lovely Straits of Mackinac has a lot of wind pretty much all the time. How many wind turbines do we have up there? Well, just like Charlie Bucket and his Wonka Bars: just two. Why only two? Who knows the real reason, but I suspect it is because there are too many well-funded lobbyists in Lansing. What do we make in Michigan? Cars. What do cars run on? Gasoline. How do you make that? Oil. See my point? The basic point I am trying to make is that we cannot hope to achieve the level of renewable energy in European countries until we pry away our government and court system away from the tight grip of special interest groups. Either that or somehow find a way to get the environmental lobby a lot more money.
That being said, change is not an arena for cynics. i'm sure that my knowledge of the capitalist system is woefully lacking, and that franz's policy is more than a little optimistic. However, the reality remains that if we want anything done, we're going to have to face and overcome the odds at some point and a "yeah, but that's not going to work" attitude is not the necessary prescription. Sure, our government is more than a little caught up in satisfying lobbyist fat cats, especially those involved with oil, but an initiative has to be started somewhere, and grass roots is the place to do it. For this reason, Franz, I think it is most feasible to begin these FIT incentives not even on the state level, but the truly grass roots level. For instance, if we could get Jackson and Dayton to support a few local renewable energy initiatives. This is surely small enough to fly under big-wig radar, but large enough--especially if this idea is adopted by local communities everywhere--to be a tangible start. My next point is that we suffer from a formidable case of nepotism. The last time I checked, I have never known Jackson to be particularly windy (except when I organize ultimate frisbee games, of course), sunny, or geothermically active (though I always thought cascades falls smelled suspiciously of sulfur). My point is that we are favoring the communities with which we are familiar as the launch pad for this initiative when they are probably not good candidates. Arizona and New Mexico communities for solar power maybe; Washington and Oregon (maybe Mackinac though) for wind; and Wyoming and Montana for geothermal maybe, but not Jackson and Dayton. However, that does not necessarily preclude our involvement. Your very internship leads me to believe gassifying the waste from the numerous michigan cattle farms, orchards, corn, soybean, al paca, camel, and snow leopard farms (wait, maybe not those last three, i forget)could be used as a viable renewable energy source with tax incentives that could suit grass roots michigan communities very well (sorry, Dayton folks, I'm leaving you out of this one). It's a lofty goal, but if we want something done, we have to try something, and being realistic and working with what we have, on a level we can manage is the way to make change.
best,
mark
Okay, there are a few things that I forgot to mention in my post. California already has adopted a state wide FiT, but I don't know as much about it as the one in Germany.
here: http://www.eere.energy.gov/news/news_detail.cfm/news_id=11592
Also, there is a bill being worked on in the federal level right now, that would give us a nationwide FiT on renewables, but again I don't know about the bill nearly as much as I do about the EEG.
here: http://www.treehugger.com/files/2008/06/renewable-energy-feedintariff-bill-house.php
I think the POTUS needs to ask Congress to declare War. America is an amazing country that can do anything when we try hard enough. And for whatever reason, we seem to like to declare wars a lot. President Johnson declared a war on poverty. Subsequent POTUS have declared wars on crime, drugs, terrorism, etc. I think it's a really good marketing gimmick to organize the people behind a common goal. And it works too. The declaring war thing I mean. When this nation comes together to focus in on a goal, we make great strides towards achieving those goals eventually. So let's figure this out. Everyone on this blog, especially Franz, knows a lot more about this energy stuff than I do, so I'm not sure what to call this proposed war, and need help to figure out what to call it. War on Oil? War on Nonrenewable Energy? War on Fossil Fuels? War on foreign energy dependency? Whatever works best. But the point is to declare a war, to put the focus on this issue on a nationwide scale. Because I think once we decide that we have that goal, we can start to bring together all the wonderful resources we have in America. Hopefully once that happens, we can avoid some of what I feel are some possible roadblocks. Once again, everyone here knows more than I do on this topic, but I think we sometimes have too many conflicting rules, which we might be able to overcome if we declare war on well whatever name works best. To explain, I love windpower and would like to see turbines wherever there is wind. But I think, please tell me if I'm wrong, that some feel wind turbines harm birds. I love hydroelectric power, but I feel, again tell me if I'm wrong, that some feel dams harm fish. But if the ultimate goal is renewable energy, perhaps the government would prioritize our laws in such a manner that we might lose a few battles, but ultimately win the war. Regardless of who is the next POTUS, or what party is in power, if we get behind a common goal, we can do anything.
Mark,
I think that this is more effective on a bigger level than the city. Since regional governments don't exist, state government is the next in line.
I'm a fan of grassroots efforts, but I also value good legislation. Why I think that this type of policy needs to be introduced on the state level is because of the potential for job creation in a big magnitude. And the fact that the Feed in Tariff requires utilities to pay an energy supplier the market price plus the tariff, and then spread it out over all of the customers.
Wow, I forgot to mention that part too. Edit!
I think oil is too big for it to be overcome by any kind of alternate, renewable energy resources. All of the aforementioned ideas are really positive and steps in the right direction, but what we need is a way to eliminate oil from our daily dependency entirely. Unfortunately I think that gas would have to reach some kind of insanely high price (around $20/gal) before some very well paid politician in Washington gets upset about having to fuel his stretch Hummer (yes, that was a little ridiculous). But you see my point.
There is great indie film that came out this year and was shown at the East Lansing Film Festival called "Blood Car." It's about the cost of gas reaching $140 per gallon in the near future and the various comical, yet sadly plausible consequences of such a situation.
My main point, which I just realized, was that we need something more powerful and reliable than wind, hydro, or geothermal as a replacement for oil.
That's where we scientists come in, I guess.
Echoing Stopher's comment about the "declare war on nonrenewable energy" idea, there has been bandied about a sort of "Manhattan Project" idea for energy: pour money and resources into developing renewable energy sources and efficiency initatives. Personally, I love that idea because it would make my chosen line of work so much easier, but there's social implications too. For instance, watch a video of John F. Kennedy's "We choose to go to the moon" speech he gave at Rice University. It's wicked inspiring, and I feel like the nation needs some uniting purpose like that.
Public investment in the energy industry is essential, and I cannot stress this enough. It can go wrong with burecracy, but if it's well-focused it grows a market and a thriving industry like a field of dandelions. Look at Franz's example of Germany: it started with feed-in tariffs, and now Germany has one of the leading solar industries in the world. They're probably level with Japan in PV and only behind Denmark in wind.
If there's too much inertia, look at Denmark where citizens' cooperatives made windpower. Some people created awareness, got consensus, and did stuff without big government or an ignorant market to eventually create the greatest wind power industry.
If it can be done in Germany and Denmark, it can be done in the U.S. too. Imagine, as Franz mentioned, Dayton's composite industry being a leading development point for turbine blades and structures. If the old auto parts factories were building gearboxes. If Jackson industry was fabricating PV (actually, just about everywhere in the United States except maybe Alaska gets enough insolation year-round to make solar energy a good idea.) If the Great Lakes areas of Michigan and Ohio were leader regions for offshore turbines and powered a good part of middle America.
Oh, and to clarify one point: wind turbines killing birds is a myth. There used to be bird kills with lattice towers in first-generation turbines in Altamont Pass in California, but new tubular towers aren't problems. Statistics show that more birds get killed hitting skyscrapers every year thatn hitting turbines.
To finish with some JFK:
"We choose to go to the moon and do the other things, not because they are easy, but because they are hard. Because that goal will serve to organize the best of our energies and skills. Because that challenge is one we are willing to accept, one we are unwilling to postpone, and one we intend to win."
Drew,
I couldn't agree more with what you posted. We have the tools and the skills and the money to accomplish this. All we need is the unification on a national level. Good policy can make all of the difference. While Drew cited the Danish model as a path not needing bureaucratic dealing, Denmark followed suit with ambitios energy policy that subsidized wind turbine purchasing (up to 70% initially). Granted, this policy proved to be a little bit over the top, as Denmark now has nearly zero growth in its domestic wind turbine market.
I think that I need to post on wind turbines.
Eric, you concern about an oil substitute is well merited. Oil is perhaps the most ideal fuel available. It is compact energy. It is easily transported through pipelines. It is easy to sell to end users. It doesn't lose potential over time from resistance, and it does require efficiency-diminshing transformations.
It is easy to understand our addiction when we realize how ideal oil actually is.
However, oil, just like any other fuel, is only a form of stored energy. There are infinite ways to store energy. We just need to find the next best form of stored energy, and then make it the best form.
Eric, if you are looking for a field to devote your phyiscs to, might I suggest batteries. We can produce electricity pretty inexpensively, and when we produce electricity from renewable sources like wind, then we are really looking good.
What we need is a way to utilize the electricity in an easy way. Trolley cars and light-rail trains have been doing it for years, but they have the organized infrastructure. If we really want to keep the family car instead of mass transport, and we will, we will need to find a suitable fuel/stored-energy-form.
Good comments, all around.
Here is a comment that I got from Jeff in an email. I thought that it deversed to be added to the comment section so here it is, from Jeff.
Franz:
I really enjoyed your article on the EEG. The way I see it, the
primary difference between the German government's proactive
participation in funding alternative energy options, and the USA; is the USA depends on the free-market system to develop these technologies. At least in the USA, I am in favor of the government staying out of the "energy business". We have seen all too often where our politicians motive's are clouded with their personal agendas. At least when the free-market (companies) delves into these
technologies their motive is to design, market, and service a product that the public wants and to make a profit. It seems that when our government gets into free-market business they make the easy
complicated and the complicated impossible. I believe the German
government is designed to tackle and lead a program such as EEG much more effectively than USA -- it really is the difference between a socialist government and free enterprise.
Best regards;
Jeff
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