Editor’s Note: Paul Hockenos is the author of “Berlin Calling: A Story of Anarchy, Music, the Wall and the Birth of the New Berlin.” The opinions in this article are those of the author. Read more opinion at CNN.
With the prices of solar and wind power, as well as batteries, so low, renewable energy should be spreading like wildfire across the United States. But although many states – such as California, Vermont, Minnesota and New York – are boldly forging ahead, most are not.
American environmentalists should cast a glance Europe’s way. There’s a quicker way to go renewable than waiting for a tsunami of state spending that may never come.
The Green New Deal pact, proposed in February by Sen. Edward Markey and Rep. Alexandria Ocasio-Cortez and embraced by scores of other US Democrats, is chock full of vibrant ideas and urgent policy considerations. It’s right that with the climate crisis accelerating faster than scientists predicted and our window to curb it narrowing, we have to think big – indeed, to pursue something at least as sweeping in scope as the New Deal recovery program of the 1930s.
Yet the Green New Deal overlooks some of the key lessons from Europe’s renewables revolution, to the detriment of rolling out renewables as fast as possible in the United States.
Critically, the clean energy boom here in Europe was not ignited foremost by government spending, which the Green New Deal implies is critical for the United States to do the same. Rather, legislation initiated by the EU and the national states opened energy markets to independent renewable-energy producers and revamped the regulatory framework to help ordinary citizens, small businesses and communities to get a foot in the door.
This strategic redesign of energy markets set the stage for Europe’s renewables buildout. “Laws matter,” Toby Couture, director of E3 Analytics, an energy consultancy in Germany, told me, “and they can be a huge driver of investment if you get the details right.”
EU members Austria, Sweden, Portugal, Denmark and Latvia, for example, now generate more than half of their electricity from renewables.
Here’s how it happened
In 1998, at the EU’s behest, Europeans began breaking up the monopolies of the giant corporate utilities that had dominated fossil fuel power generation and distribution for decades.
The legislation forced the large utilities to make way for smaller decentralized entrants, foremost those in renewable energy. National governments, pushed by grassroots environmentalists, introduced rules that prioritized the sale of green energy to the grid and created price supports for investors that helped them recover high investment costs. New consumer rights entitled customers to switch their energy providers at any time, without red tape or other hassles.
“The legislation,” Couture explained to me, “enabled ordinary citizens, farmers, church groups and companies to finance their projects through bank loans. The ever-greater sophistication of renewables technology, mostly solar and wind, gave rise to stable cash flows, profitable projects and investors who could repay large loans.”
Challenges in the US market
Many US states lack the relevant legal framework to enable them to triple and quadruple clean-energy growth in the near future, as must happen. The conventional utilities, corporate energy companies and politicos tied to “big energy” rely on the existing market rules – which were made by them and for them – to obstruct clean energy’s breakthrough, just as they once had in Europe.
“State policies need to support community renewables,” Sharon Klein, an energy expert at the University of Maine, wrote to me in an email, “rather than actively blocking them or trying to drive them toward a utility ownership model.”
If the federal government is unwilling, then the states need to sweep aside these impediments, for example, with legislation mandating the access of all producers, no matter how large or small, to the grid. Grid operators, preferably ones independent from the utilities, must be compelled to remunerate all producers with transparent, guaranteed prices – the way Europe kick-started its clean-energy transformation.
In the same vein, US utilities can’t be allowed to cap the volume of renewables that they accept, which many still do. In Europe, renewables have grid priority (it’s the first energy in line to be bought every day in energy markets), and there’s no upper limit on supply. “It would be a revolution were the US to remove the limits set by the utilities,” Miranda Schreurs, a US energy scholar at the Technical University of Munich, said to me.
So too must there be bureaucracy-free legal forms for the creation of energy collectives, cooperatives and community projects, the kinds that have propelled the energy transition forward in Germany, France, Denmark and Scotland.
Decentralized community energy could cover much of the world’s power needs, say experts at Friends of the Earth Germany and the German think tank Energy Watch Group. With the relevant legal code, communities and the private sector will invest in distributed renewables because there’s cheaper, cleaner energy to gain, while their localities profit from tax revenues, wealth and job creation.
Tax incentives for renewables
As for community energy in the United States, the renewables’ incentives that currently exist, such as tax credits for investors, must be reformulated or even replaced completely.
“Securities laws make it hard to organize collective projects that are for mutual profit,” John Farrell of the Institute for Local Self-Reliance, a nonprofit group in Washington that advocates for local sustainability solutions, said to me. “Customers in some states can get their earnings from community solar credited directly on their electric bill, thus avoiding complex tax issues.”
Mark Richardson of US Light Energy, a community solar developer in upstate New York, told me that small-scale solar projects should be made tax-exempt or, at most, subject to a 1% tax on electricity generation revenue for the next 25 years. “Taxing projects that receive incentivizing tax breaks designed to promote renewable energy robs Peter to pay Paul. It doesn’t make any sense.” Currently, there are a variety of tax laws, depending on municipality, around the sale of energy.
Farrell opposes the US system’s reliance on tax credits as the major incentive for investing in zero-carbon energy, as it implicitly benefits the wealthy – those with a large tax base from which to deduct investments. “It leads to inefficiency and complex business models,” Farrell said. “You have middlemen participating largely to absorb the tax credit rather than to develop renewable energy.” Solar leasing companies, for example, act as third parties between the home or business owner and the utility, which means that the customers of leasing companies get less than those who own the panels on their roof, Farrell explains on the Institute for Local Self-Reliance website.
Farrell would prefer a system such as that in Europe, where producers are paid directly per kilowatt hour by the grid operators. Europe’s renewable-energy price supports, known as feed-in tariffs, are one proven way to trigger the spread of renewables.
This guaranteed price for producers is often referred to as a “subsidy,” but it’s not, as the European Court of Justice recently ruled. The energy surcharge is tacked onto the retail price paid by consumers to their energy provider – about 13% of the price of energy in Europe.
Get our free weekly newsletter
In Europe, many countries have indeed invested heavily in their switch to sustainable economies. But these funds have gone toward the like of pilot projects and infrastructure, such as electric vehicle charging stations. EU countries spend about $1.5 billion a year on research and development.
This is imperative in the United States too, but the rollout of renewable energy will probably be led by communities, households and entrepreneurs – once conducive laws are in place.