Saturday, May 17, 2008

Germany's Solar Valley

While the entire Center for Nanotech nology in Society was having its site visit from our funders, the National Science Foundation, the New York Times published a piece about one of the solar companies our Innovation Group has been watching, Q-Cells of Thalheim, a town in the former East Germany. Q-Cells "surpassed Sharp last year to become the world's largest maker of photovoltaic solar cells." Some people are calling the area around Thalheim "Solar Valley." Germany gets 14% of its energy from renewable sources, has half of the worlds total PV installations, and is the third largest producer of PV modules (behind only China and Japan).

Why is solar doing so well in Germany? Q-Cells is a sample beneficiary of public support for renewable energy that is far better in Germany than what we have in the United States. One part of our lagging support is direct R&D investment. During my presentation yesterday I showed a chart from a paper of one of our partners, David Mowery, showing the literally invisible chunk of US federal R&D spending devoted to energy - about $3 billion a year in 2006, for all energy research, including under $70 million for carbon capture and sequestration. Less than one-tenth of the already small amount of $3 billion goes to all forms of renewable energy in the US.

But another piece of the story is procurement.

At the heart of the debate is the Renewable Energy Sources Act. It requires power companies to buy all the alternative energy produced by these systems, at a fixed above-market price, for 20 years.

This mechanism, known as a feed-in tariff, gives entrepreneurs a powerful incentive to install solar panels. With a locked-in customer base for their electricity, they can earn a reliable return on their investment. It has worked: homeowners rushed to clamp solar panels on their roofs and farmers planted them in fields where sheep once grazed.

The amount of electricity generated by these installations rose 60 percent in 2007 compared with 2006, faster than any other renewable energy (solar still generates just 0.6 percent of Germany’s total electricity, compared with 6.4 percent for wind).

Solar has been hurt for 25 years by "market failure" - the failure of markets to provide financial returns that support socially-desirable investment. Germany has overcome solar market failure as well as anyone. Even as the Merkel government proposes undoing this, the US should implement its own versions of feed-in tariffs that will support consumer switching.

Friday, May 02, 2008

Alternative Energy and Federal Credits

So many people mentioned this Tom Friedman piece on upside-down energy policy that I had to link it. Friedman is right about how stupid it is for Congress to have continued credits for gas and oil and stopped those for solar and wind. It's also worth noticing the testimonies in the piece about how alternative energy in the US, especially wind, attracts investment capital only with tax deals to offer investors.
“It’s a disaster,” says Michael Polsky, founder of Invenergy, one of the biggest wind-power developers in America. “Wind is a very capital-intensive industry, and financial institutions are not ready to take ‘Congressional risk.’ They say if you don’t get the [production tax credit] we will not lend you the money to buy more turbines and build projects.”

Friedman's ending is painfully true: "The McCain-Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious — the energy to do big things in a sustained, focused and intelligent way."