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Posted on 12-02-2016

Renewable Energy in Texas Versus Germany

A report published by Stanford's Steyer-Taylor Center for Energy Policy and Finance looked at three of the world’s largest economies and largest energy jurisdictions in an attempt to compare their approaches to ramping up renewable energy. Included in the report is a comparison of electricity rates in Germany to those in Texas and California, as well a discussion of how renewables contribute to overall costs. Germany is the world’s fourth-largest economy and an aggressive adopter of renewable energy;  California and Texas are the world’s number eight and 12, respectively, and both are leaders in the U.S. with respect to wind and solar deployment.

The report illustrates that moving to a higher share of electricity sourced from wind and solar need not put a large burden on ratepayers. Germany’s average electricity rates are about three times higher, but a closer look at the breakdown of the components of this high rate shows that only about 21 percent of Germany’s average retail electricity rates can be attributed to levies imposed to pay renewable generators.

The balance can be attributed to other factors, including the high cost of natural gas in Europe where cheap U.S. natural gas is not available. In Texas, one of the world’s largest producers of natural gas, the impact is just the opposite. The abundance has led to cheaper electricity rates.

Another huge chunk of Germany’s high rates can be attributed to legacy costs from the country’s relatively early and aggressive push into solar power. The report implies that early German investment in solar indirectly subsidized the global solar buildout of the last several years by leading to the buildout of Chinese capacity required to fulfill German need for solar panels. According to energy commentators quoted in the report, this precipitated the huge drop in cost that the rest of the world has enjoyed the past several years. German commitment to solar power drove the economies of scale that brought down prices worldwide.

As the Texas economy expands, electricity usage per unit of economic output has actually fallen. This is a fact that came as somewhat of a surprise to Texas grid planners that realized that their projections of electricity shortages based on the continued economic growth of the state were overly pessimistic. Consider the housing sector, which is a large contributor to Texas economic growth. New houses are substantially more energy-efficient than older houses.

On the one hand, early and aggressive movers into renewable energy such as Germany seem to have paved the way for jurisdictions such as Texas to take advantage of rapidly improving technology and falling production costs for wind and solar equipment. The report suggests that deployment of wind and solar need not add substantially to consumer costs.

Reprinted with permission from Renewable Energy World.

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