Much of our work on clean energy at the Metro Program has focused on local variation: how different jurisdictions generate varying solutions and different outcomes. Now, Nonresident Senior Fellow Dan Reicher and his colleague Felix Mormann at Stanford University’s Steyer-Taylor Center for Energy Policy and Finance have drilled down on the varied experiences of a fascinating trio of locations in a new paper released today. Recently Dan and Felix engaged with me in an e-mail dialogue on their comparisons of the solar and wind deployment experiences of California, Texas, and Germany:
Isn’t it a bit odd to compare two states and a nation?
Dan: It’s not so odd when you consider that state energy markets and policies–such as the 29 states with renewable portfolio standards—have driven much of the renewable energy deployment in the United States, with California and Texas leading the pack (of course helped by federal tax credits). So, when it comes to renewables, we really think of all three as distinct and highly intriguing “countries.”
How are these three places comparable, then?
Felix: For starters, they are all economic powerhouses with Germany ranked fourth, California eighth, and Texas 12th among global economies. All three have made considerable progress in the build-out of solar, wind, and other clean energy infrastructure. And along the way each of them has hit roadblocks—and eventually found ways to overcome them, albeit following very different policy approaches in rather distinct political systems.
What are the distinctive traits of each market’s energy policy?
Dan: California and Texas have both used renewable portfolio standards to create markets for renewable energy but they have followed very different policy approaches to develop these markets. Texas has focused primarily on wind power and has made the build-out of thousands of miles of high-voltage transmission lines a priority to deliver wind-generated electricity from rural Texas to the cities. This occurred through the legislature’s enactment of the Competitive Renewable Energy Zones (CREZ) program. Meanwhile, California, deploying wind, solar, and other renewables, has complemented its renewable portfolio standard with a suite of different policies, from net energy metering to reverse auction mechanisms to a feed-in tariff for smaller-scale facilities. Speaking of feed-in tariffs, Germany appears to have an exclusive relationship with this policy, using more than 30 different feed-in tariffs to advance the country’s Energiewende goal of meeting 80 percent of the country’s energy demand with renewables by 2050.
What are the comparative insights you take away from the analysis?
Felix: One of the most intriguing insights from our analysis relates to the levelized cost of electricity from renewables. Germany gets little more than half the sunshine that California and Texas enjoy. So imagine our surprise when we realized that, despite the country’s poor solar resource quality, German solar installations manage to generate electricity at a cost that’s comparable to that of Texas and only slightly higher than California facilities. From what we can tell, this is largely due to Germany’s more favorable treatment of “soft costs” such as the cost of financing, permitting, installation, and grid access.
Dan: Another important finding of our analysis addresses common concerns that ramping up the share of weather-dependent, intermittent renewables like solar and wind inevitably jeopardizes the stability of the electric grid. Our data suggests the opposite. For example, Germany tripled the amount of electricity generated from solar and wind to a market share of 26 percent while actually reducing annual average outage times in its grid. California, too, actually managed to lower average service interruption times, while more than tripling the amount of electricity produced from solar PV and onshore wind to a joint market share of 8 percent. Only Texas experienced a moderate increase—from 92 minutes in 2006 to 128 minutes in 2013—in average annual outage times while ramping up its wind-generated electricity share six-fold to 10 percent.
Felix: Finally, our work helps put electricity costs in perspective. The New York Times, the Wall Street Journal, and others have pointed to Germany’s high electricity rates as proof that the country’s renewables policy isn’t working. To be sure, we did find Germany’s retail rates for residential customers to be two to three times as high as those in California or Texas. But we also found that industrial ratepayers in Germany, who are exempt from financing the country’s feed-in tariffs for renewables, actually pay less for electricity than their counterparts in California and Texas. Moreover, higher residential electricity rates in Germany have helped encourage greater energy efficiency as envisioned by the German parliament such that average monthly household electricity bills are only slightly higher than those in California and, in fact, lower than in Texas. These and other findings from our study suggest that renewable energy is ready to play its part in successful climate change mitigation – something to keep in mind for the upcoming climate talks in Paris.