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Germany Uses Economies of Scale to Shape Renewables Market

September 16, 2014 by Karen Henry

In the race for renewable energy adoption, Germany is the clear leader among industrialized nations. Over the last 10 years, it has spent more than $140 billion on its renewable energy program, using guaranteed returns to lure farmers, homeowners, businesses and local cooperatives to install solar panels, wind turbines, biogas plants and other sources of renewable energy.

The aggressive, multi-billion dollar push was part of a larger plan to lower the cost of going green by creating rapid growth in the once-tiny market for renewable power, according to an article in The New York Times.

The plan seems to have paid off.

Chinese manufacturers seized the opportunity to meet Germany’s intense demand for wind turbines and solar panels, helping to push prices down faster than expected. Today, Germany is well on its way to getting 30 percent of its power from renewable sources.

The rapid transition has not come without a cost. German utilities have been devastated by the transition, the article states, forcing the closure of a number of conventional power plants. However, fossil-fuel power plants may not completely go the way of the dinosaur. Given the intermittent nature of renewable energy, Germany has begun to recognize that it cannot rely on renewable energy alone for its electricity needs. Conventional power plants are still needed when the sun is not shining and the wind is not blowing, so the government might consider making regular payments to persuade utilities to keep some fossil-fuel power plants on standby for times when renewable sources are lower.

Germany is also beginning to invest in the newer forms of renewable technology, providing three German utility companies with power price guarantees of several times below market rate to encourage them to continue developing large-scale, offshore wind farms off the resort island of Heligoland. The utilities have long-range plans to go as far as 125 miles offshore.

Germany is willing to make the investment in this considerably more expensive technology, banking on the costs of harnessing offshore wind to drop sharply as the market grows over the coming decade, just as it did with earlier forms of renewable technology.

Photo via Shutterstock.