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German Renewable Energy Act (EEG) was designed to encourage cost reductions based on improved energy efficiency from economies of scale over time. The EEG also differentiates between technologies such that each renewable energy source (RES) receives a different payment guaranteed price according to its generation cost, ranging from 3.58 - 9.67 €-Cents per kilowatt-hour for hydropower to 35.49 – 51.7 €-Cents per kilowatt-hour for solar power (Rickerson, et al., 2007; Hirschl, 2008).

The grid feed-in tariffs provide incentives to every company involved in renewable energy generation business, especially the small and medium-sized energy firms, to invest in developing and generating RES, decrease initial market entry barrier for these businesses, and reduce the costs of RES for production and consumption over a period of time.

Various studies, includine EC's study reveal that because the feed-in tariff provides financial certainty, it is more cost effective and less bureaucratic than other support schemes such investment or production tax credits, quota based renewable portfolio standards (RPS), and auction mechanisms.(EC, 2005; Morris, 2007; Butler & Neuhoff, 2008)

In addition, the feed-in tariff generates more competition, more jobs and more rapid deployment for manufacturing, and does not pick technological winners, such as more mature wind power technology versus solar photovoltaics technology (EC, 2005; Morris, 2007; Butler & Neuhoff, 2008).

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[edit] References

  • Butler, L. & Neuhoff, K. (2008) "Comparison of feed-in tariff, quota and auction mechanisms to support wind power development." Renewable Energy 33, 1854–1867.
  • Commission of the European Communities (EC). (2005) The Support of Electricity from Renewable Energy Sources, Brussels.
  • Hirschl, B. (2008) Erneuerbare Energien-Politik im Mehrebenensystem: Eine Multi-Level Policy Analyse der deutschen Politik für erneuerbare Energien im Strommarkt. Energiepolitik und Klimaschutz. Wiesbaden: Verlag für Sozialwissenschaften.
  • Morris, C. (2007) ‘The Irony of U.S. and UK Renewable Policies. What prevents these two counties from accepting Germany's success?’ Renewable Energy World. June 25.
  • Rickerson, W. et al. (2007) ‘If the Shoe FITs: Using Feed-in Tariffs to Meet U.S. Renewable Electricity Targets.’ The Electricity Journal 20(4), 73-86.

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