Economic impacts from the promotion of renewable energy technologies: The German experience

• Published in: Energy policy Vol. 38; no. 8; pp. 4048 - 4056
• Main Authors: Frondel, Manuel, Ritter, Nolan, Schmidt, Christoph M., Vance, Colin
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.08.2010; Elsevier; Elsevier Science Ltd
• Series: Energy Policy
• Subjects: Alternative energy; Alternative energy sources; Applied sciences; Climate; Climate change; Cost engineering; Economic data; Economic impact; Economics; Employment; Energy; Energy economics; Energy policy; Energy policy Climate Employment; Environmental law; Environmental protection; Exact sciences and technology; Financing methods; Focusing; General, economic and professional studies; Germany; Incentives; Innovation diffusion; Job creation; Legislation; Marketing; Markets; Natural energy; Promotion; Renewable energy; Renewable energy sources; Renewable resources; Studies; Subsidies; Tariff; Technology; Europe; Germany; Employment; Climate; Energy policy; Acquired experience; Economic impact; Renewable energy
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2010.03.029

The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany’s experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. To the contrary, the government’s support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.