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Who Invented the Solar Feed-in Tariff (FIT)? –Or What We Can Learn From Aachen's Success in Harnessing Clean Energy

Article by: dev


The following is an excerpt from Bob Johnstone’s new book Switching to Solar.

The solar industry is booming. During the past decade PV shipments have grown by three orders of magnitude. In 2010 shipments were up over a hundred percent on 2009.

How to account for this explosive growth? Though success has a thousand fathers, most analysts agree that the trigger was Germany’s solar feed-in tariff, first enacted in 2000 then turbocharged in 2004.

Who deserves the credit for this extraordinarily effective policy mechanism? That was my question when I began research for my book, Switching to Solar. In November 2007 I flew to Germany to find the answer.

In Berlin I interviewed Hans-Josef Fell, the hands-on Green politician who crafted the Renewable Energies Act, the legislation that launched the solar FIT. I also met the now, alas, late Hermann Scheer, the canny deputy who did more than anyone to popularize solar, and who was responsible for shepherding the Act through Germany’s parliament, against government wishes.

But the politicians did not originate the solar FIT. That distinction belongs to a little-known activist named Wolf von Fabeck, a retired soldier who lives in the provincial German city of Aachen. In November 2008 I returned to Germany to meet this humble man.

Like many of his fellow-countrymen von Fabeck is a nature lover. In 1984 he was upset by damage to forests caused by acid rain from coal-fired power plants. Then in April 1986 came Chernobyl.

Spurred by the catastrophe, von Fabeck began investigating alternatives. He bought a solar panel and hooked it up to his wife’s food processor. The blades turned very slowly. “But at least it worked,” he noted.

With seven friends Von Fabeck formed a group, the solar energy supporters association of Aachen. From the outset the group realized they would have to pay more for solar. But they were willing to bite the bullet, to make the conceptual leap and say, We want photovoltaic, and we’re prepared to pay what it takes. But how would they pay for it? That was the question.

“We were idealists, but we were not many,” von Fabeck told me. “Most people are not idealists, they act in their own economic interest.” If the solar movement was to go mainstream, financial incentives would be necessary. “We had to change the market environment so that non-idealists would be rewarded for doing the right thing.”

Von Fabeck’s original thought was that purchasers of solar systems should be eligible for a hundred percent rebate. But he soon realized that such a scheme would subsidize the purchase of even the most expensive hardware, a wasteful use of public funds.

Inspiration came from the Swiss town of Burgdorf. There, to encourage citizens to instal solar systems, the local utility offered a premium price for electricity thus generated, paid for by setting aside one percent of electricity rates.

“Burgdorf was paying higher tariffs long before we had the idea,” von Fabeck admitted. “But it wasn’t a cost-covering feed-in tariff – [the Swiss] just paid a little bit more, and that was a good idea. But they didn’t make a broader concept or principle from it.”

Until then, the reason most people installed PV systems was for their own use, because they wanted to do good for the planet. Any leftovers went to the grid.

But under the system pioneered in Bergdorf, none of the electricity generated was for personal use, it was all fed into the grid. The intention was to help meet society’s need for clean energy, not the individual’s.

This radical new scheme fundamentally altered the role of the private generator. “The main idea,” von Fabeck explained, “was that private owners of solar systems should be treated exactly as if they were utilities.

“Owners should be able to feed the electricity they generate into the public grid and receive in return a payback rate that allows them to finance and maintain their systems, plus a small profit. Since everybody consumes the clean energy that the owners generate, everybody should pay for it, via their electricity bill.

“This way, the utilities would be responsible for reimbursing private producers. There would be no need for state-funded subsidies, or new taxes, or any government involvement at all.”

Ultimately, it boiled down to a simple equation. Given that (a) the rated lifetime of a household PV system is twenty years, and that (b) the average annual insolation is known, then (c) the number of kilowatt hours a system will generate over twenty years can be calculated.

The upfront cost of a typical residential PV system was around $25,000. The question was thus, How much would a utility have to pay system owners per kilowatt hour over twenty years to compensate them for their investment?

Von Fabeck worked out that the answer was about $1.20 per kilowatt hour, around twenty times the cost of conventionally-generated electricity. To pay for this, as at Burgdorf, a one percent surcharge on electricity rates would suffice. The annual increase in cost to an average family would be just $18.

“The initial thinking was that [the surcharge] would be too heavy a burden,” Hans-Josef Fell told me. “But Wolf von Fabeck was the first who calculated this, and he opened our eyes – it is nearly nothing for consumers.”

Von Fabeck’s feed-in tariff methodology was published in 1994. Over the next six years, thanks to efforts by grassroots groups, it was adopted across Germany in small towns and big cities like Hamburg and Munich. In 2000 the methodology would serve as the basis for Germany’s “ecological masterpiece,” the Renewable Energies Act.

“My book, Switching to Solar, is mainly a history of the post oil-crises solar industry. But as its subtitle – What We Can Learn From Germany’s Success in Harnessing Clean Energy – indicates, the book is also partly intended as a primer. Lessons include:

Don’t try to reinvent the wheel. The Germans have a wealth of experience with feed-in tariffs. Yet instead of benefiting from their experience, other countries (Spain for example) ignore it and come unstuck.

Keep it simple. Feed-in tariffs are easy to understand. Buyers of solar systems in Germany merely inform their local utility that, as of a certain date, they will be supplying electricity to the grid. The paperwork is minimal, unlike the bureaucratic nightmare that confronts would-be PV purchasers in the US.

– Never give up. To get feed-in tariffs adopted, Wolf von Fabeck fought a recalcitrant local utility for years. Now aged 75, he is still campaigning, for one hundred percent renewable energy.”

Bob Johnstone is a writer based in Melbourne, Australia. His previous book was Brilliant! Shuji Nakamura and the Revolution in Lighting Technology (2006).