Comparing U.S. and German Policies to Promote Distributed Solar PV Growth: The Triumph of the Feed-in Tariff

Germany, a northern country with limited sunlight, has eight times more installed solar electricity capacity than the United States. The majority of Germany’s solar PV systems are distributed, rooftop installations owned by residential and commercial consumers. The United States, in contrast, is trending towards large, centralized utility-scale projects far from consumers and owned by major financial investors. Since 1990, Germany has employed national feed-in tariffs, requiring electric utilities to provide long term, fixed price contracts to solar installations. At the same time, the United States has employed a complex assortment of local state policies without turning to feed-in tarrifs. This paper compares both trends to determine why Germany has outpaced the United States in distributed solar PV capacity. It begins by examining Germany’s feed-in tariff law: the Erneurebare-Energien-Gesetz (“EEG”), or Renewable Energy Sources Act. It traces EEG’s success to the law’s targeted tariff rates with 20-year fixed price contracts and absence of system size limitations. The paper then examines the regulatory structure of the United States to determine why states have been unable to match these factors. It explores the complex federal-state relationship under the Federal Power Act of 1920 (“FPA”) and the Public Utilities Regulatory Policy Act of 1978 (“PURPA”). It examines how federal control over wholesale electricity rates prevents states from creating the targeted tariff rates employed by Germany’s EEG. The paper then analyzes state net-metering and renewable portfolio standards, two policies that bypass federal control over wholesale electric rates. While these policies provide important incentives for distributed solar PV generation in the United States, they fail to recreate the same factors pivotal to EEG’s success. This policy dynamic, which centralizes power in the federal government and limits state action, prevents willing states from fully capitalizing on solar resources that far surpass those of Germany