Effectiveness of The German Renewable Energy Act
Various studies, including EC's study reveal that because the feed-in tariff provides financial certainty, it is more cost effective and less bureaucratic than other support schemes such as investment or production tax credits, quota based renewable portfolio standards (RPS), and auction mechanisms.(EC, 2005; Morris, 2007; Butler & Neuhoff, 2008)
The economic outcome of the EEG for Germany has been impressive. According to the Green Energy Act Alliance, 2011, the net benefit of the EEG exceeds the additional costs of initial investment - by 3.2 billion Euros. Building a safe and clean power supply incurs costs. However, Krewitt and Nitsch (2001) compared the external costs avoided in the German energy system to the compensation to be paid by grid operators for electricity from renewable energies and found that results clearly indicate that the reduced environmental impacts and related economic benefits outweigh by far the additional costs for the compensation of electricity from renewable energies.
In addition, the feed-in tariff generates more competition, more jobs and more rapid deployment for manufacturing, and does not pick technological winners, such as more mature wind power technology versus solar photovoltaics technology (EC, 2005; Morris, 2007; Butler & Neuhoff, 2008).
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