Policies to Promote Non-hydro Renewable Energy 

in the United States and Selected Countries 

February 2005 

Energy Information Administration 

Office of Coal, Nuclear, Electric and Alternate Fuels 

United States Department of Energy 

Washington, DC 20585 

y

This report is available on the Web at: 

http://www.eia.doe.gov/fuelrenewable.html

This report was prepared by the Energy Information Administration, the independent statistical and analytical agency 

within the United States Department of Energy. The information contained herein should be attributed to the Energy

Information Administration and should not be construed as advocating or reflecting any policy of the Department of 

Energy or any other organization. 
- 2 - 

 Contacts 

This report was prepared by the staff of the Renewable Information Team, Coal, Nuclear, and Renewables Division, 

Office of Coal, Nuclear, Electric and Alternate Fuels. General information regarding this publication may be 

obtained from Fred Mayes, Team Leader (202/287-1750, e-mail fred.mayes@eia.doe.gov). Questions about the 

preparation and content of the report should be directed to Mark Gielecki, Economist (202/287-1729, e-mail 

mark.gielecki@eia.doe.gov) or Janice Poling, Presidential Management Fellow (202/586-3823, e-mail 

janice.poling@eia.doe.gov). 
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Table of Contents 

1. Introduction ................................................................................................................................................................4 

2. Non-hydro Renewable Energy Policy in the United States .......................................................................................6 

2.1 Background ..........................................................................................................................................................6 

2.2 Federal Non-hydro Renewable Energy Policies .................................................................................................6 

2.2.1 Regulatory Measures and Financial Incentives ...........................................................................................6 

2.2.2 Research and Development ........................................................................................................................7 

2.3 California .............................................................................................................................................................8 

2.3.1 Background..................................................................................................................................................9 

2.3.2 History of Non-hydro Renewable Energy Policies in California...................................................................9 

3. Non-hydro Renewable Energy Policy in Selected Foreign Countries .....................................................................11 

3.1 Germany............................................................................................................................................................11 

3.1.1 Background................................................................................................................................................11 

3.1.2 Research, Development, and Demonstration (1974-present)...................................................................12 

3.1.3 Electricity Feed-In Law (1991) and Renewable Energy Law (2000) .........................................................13 

3.2 Denmark............................................................................................................................................................14 

3.2.1 Background................................................................................................................................................14 

3.2.2 Investment Subsidy (1979-1989)...............................................................................................................16 

3.2.3 Production Subsidy and other Direct Support Mechanisms (1981 and 1992)...........................................17 

3.2.4 Domestic Market Support (1990-2000)......................................................................................................17 

3.3 The Netherlands................................................................................................................................................18 

3.3.1 Background................................................................................................................................................18 

3.3.2 Investment Subsidies (1986 and 1991) .....................................................................................................19 

3.3.3 Windplan ....................................................................................................................................................20 

3.3.4 Demand-Pull Ecotax System .....................................................................................................................21 

3.4 Japan.................................................................................................................................................................21 

3.4.1 Background................................................................................................................................................21 

3.4.2 Policies.......................................................................................................................................................23 

3.5 Comparison of Policies to Promote Non-hydro Renewable Energy .................................................................25 

4. Conclusion ...............................................................................................................................................................26 

4.1 Political Commitment.........................................................................................................................................26 

4.2 Public Opposition ..............................................................................................................................................27 

4.3 Structure of Policies ..........................................................................................................................................27 

References....................................................................................................................................................................28 

Figures 

Figure 1. United States Electricity Generation, 2003 .................................................................................................... 6 

Figure 2. Wind Capacity & Major US and State Policies, 1980-2003 ........................................................................... 8 

Figure 3. California Electricity Generation, 2003........................................................................................................... 9 

Figure 4. German Electricity Generation, 2002 ........................................................................................................... 11 

Figure 5. Germany’s Non-hydro Renewable Energy Policies and Growth, 1980-2002 .............................................. 12 

Figure 6. Danish Electricity Generation, 2002............................................................................................................. 15 

Figure 7. Denmark’s Non-hydro Renewable Energy Policies and Growth, 1979-2002 .............................................. 16 

Figure 8. Dutch Electricity Generation, 2002............................................................................................................... 19 

Figure 9. The Netherlands' Non-hydro Renewable Energy Policies and Growth, 1980-2002 .................................... 20 

Figure 10. Japanese Electricity Generation, 2002 ...................................................................................................... 22 

Figure 11. Japan’s Non-hydro Renewable Energy Policies and Growth, 1974-2002, 

 with Installed PV Capacity 1992-2002........................................................................................................ 22 

Tables 

Table 1. Net Maximum Electric Capacity (GW) December 31, 2002 ............................................................................ 4 

Table 2. Summary Comparison of Countries’ Non-hydro Renewable Energy Policies and Incentives ...................... 25 
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1. Introduction 

Since the energy crises of the 1970s, many countries have become interested in developing renewable energy technologies for 

electricity generation. At first, many countries pursued this strategy as a way to reduce dependence on imports of fossil fuels. 

However, with an increased awareness of environmental issues in the 1980s and 1990s, many countries have continued their 

renewables strategies as a means of protecting the environment. This article examines policies designed to encourage the 

development of non-hydro renewable energy in four countries—Germany, Denmark, the Netherlands, and Japan—and 

compares the policies enacted in each of these countries to policies that were used in the United States between 1970 and 2003. 

For each country, policy development is analyzed in the context of historical non-hydro renewable generation data to try to 

determine which types of policies most effectively increase non-hydro renewable generation. Since this paper uses data to 

examine the effectiveness of policies, more recent policies (e.g., renewable portfolio standards) will not be analyzed closely, as 

there is not yet enough data to determine their ultimate effect on non-hydro renewable generation.1

 

Clearly, many conditions differ among these countries—even in regions within countries—such as natural resource 

endowments, political and economic systems, and cultural traditions. All of these factors can lead to differences in energy costs 

and prices. Natural resource endowments are important because they can impact the energy choices countries make. For 

example, Denmark has virtually no hydro potential, Japan has little fossil energy, and Germany has a relative abundance of coal

resources. Additionally, the countries examined in this report tend to have higher electricity prices than the United States, 

potentially reducing the relative cost of policies to promote non-hydro renewables.2

Another point worth noting is that the differences among countries mentioned above affect policy choices and may make some 

policies not applicable in certain countries. Finally, a major policy that will directly affect the energy choices of all the countries 

analyzed here except the United States is the Kyoto Protocol. With Russia’s ratification in November 2004, this international 

agreement to reduce emissions of greenhouse gases of its industrialized country signatories, compared to 1990 levels, entered 

into force in February 2005.3

In this report, generating capacity values from various sources are used in the country discussions to provide specialized 

information on specific issues. For comparability Table 1 below shows country generating capacities according to the 

International Energy Agency as of yearend 2002. 

Table 1. Net Maximum Electric Capacity (GW) December 31, 20024

Fossil-Fired Nuclear Hydro Non-hydro 

Renewables 

United States............................. 758 105 96 20 

Germany ................................... 81 23 10 12 

Denmark.................................... 10 0 0.01 3 

Netherlands............................... 20 0.45 0.04 1 

Japan ........................................ 173 46 46 1 

 GW = Gigawatts 

 Source: International Energy Agency, Electricity Information 2004, OECD/IEA, 2004. 

Each country was chosen because its experience with renewable energy and renewable energy policy is exceptional in some 

way. For instance, 21 percent of the electricity generated in Denmark was from wind power during 2003. No other country in 

the world has integrated such a large percentage of non-hydro renewables into its electric grid. Examining the history of 

renewables development, and in particular, the development of the wind industry in Denmark, is useful because Denmark’s 

policies succeeded in increasing both the capacity and market share of renewable energy. 

Germany, a country much larger than Denmark and the country with the largest economy in Europe in 2003, has the most 

installed wind capacity in the world, increasing from 12 gigawatts (GW) in 2002 to more than 14.5 GW in 2003.5

 In high-wind 

 

1

 We would like to acknowledge a few people whose assistance was instrumental in the writing of this paper. Janet Sawin, of the World 

Resources Institute, allowed us to draw extensively from the appendixes of her Ph.D. dissertation for the details of renewable energy policies 

in Denmark, Germany, and California. Bruce Bawks, of EIA’s Office of Energy Markets and End Use, referred us to the following Japan 

experts, who provided information on Japan’s renewable energy policies: Hiroki Kudo, Group Manager, Environment and Energy 

Conservation Group, The Institute of Energy Economics, Japan; Kaoru Yamaguchi, Ph.D., Group Manager, New & Renewable Energy Group, 

The Institute of Energy Economics, Japan; Naoki Matsuo, Ph.D., Chair, Senior Research Fellow, Advisory Services on Climate Strategy. 

Tineke de Vries, Environmental Business Liaison, Royal Embassy of the Netherlands, assisted us with identifying relevant renewable energy 

policies in the Netherlands. 

2

 International Energy Agency, Energy Prices and Taxes, Quarterly Statistics, Third Quarter 2004. Tables 19 and 20. Paris. 3

 BBC News, February 2005, “Kyoto Protocol Comes into Force,” http://news.bbc.co.uk/2/hi/science/nature/4267245.stm, accessed February 

23, 2005. 

4

 This report contains information on both renewable electric capacity and generation. Capacity is measured in watts and refers to the 

maximum amount of electricity produced at any given moment. Generation is measured in watthours and refers to the cumulative amount of 

electricity produced over a given time period.

5

 Central Intelligence Agency, The World Factbook 2004, “Germany,” http://www.cia.gov/cia/publications/factbook/geos/gm.html#top, 
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areas of Germany, wind-generated electricity makes up about 20 percent of all electricity on the grid, although overall, Germany 

gets about 5 percent of its electricity from renewables. 

The Netherlands generated about 8 percent of its electricity from non-hydro renewables in 2002, and that percentage has 

increased significantly throughout the 1990s.6

 The Netherlands also imports renewable electricity from neighboring countries. 

The Netherlands has used a more voluntary approach towards developing renewables than Germany and Denmark and has still 

achieved remarkable results, particularly with cogeneration of waste and biomass. 

Japan is the world’s fourth largest energy consumer and second largest energy importer. Japan also implemented an aggressive, 

successful solar photovoltaics (PV) program beginning in the 1990s. 

This article will first briefly describe U.S. Federal legislation that encouraged the growth of renewable energy. Next, the report 

examines California, where Federal and State legislation combined to install nearly all the U.S. wind capacity as of the early 

1990s. Having established an understanding of Federal and California renewable energy policies, the report then compares the 

policies of the other countries to similar laws enacted in the United States. Finally, some conclusions are drawn about why 

similar policies had dramatically different results in different countries. 

Except for the United States and California, for which 2003 data are available, the electricity generation data presented in this 

article are for the year 2002, the most recent year for which all data, in particular, detailed renewables data, are available.

 accessed April 26, 2004. 

6

 Energy Information Administration, International Energy Annual 2003. Various Tables. Accessed December 2004. 
2. Non-hydro Renewable Energy Policy in the United States 

2.1 Background 

The United States has the largest economy in the world, with a population of 290 million in an area about two and a half times 

the size of Western Europe.7

 In 2003, the United States generated 3,883 billion kilowatthours (kWh) of electricity.8 About 71

percent of United States electricity was generated from fossil fuels, about 20 percent from nuclear power, another 7 percent

from hydroelectric facilities, and the remaining 2 percent from other renewables (Figure 1). Biomass (71 percent) was the 

predominant non-hydro renewable fuel for electricity generation in 2003, followed by geothermal and wind. Solar thermal and 

photovoltaics together accounted for less than 1 percent of U.S. non-hydro renewable generation.

In the United States, energy policies are the product of both individual State and Federal policies. California is featured because 

it has been among the most active States in encouraging renewable energy.9

Solid Biomass (46%)

Biomass (71%) 

Figure 1. United States Electricity Generation, 2003

Solar Thermal and PV (<1%) 

Source: Energy Information Administration, Electric Power Annual 2003, December 2004, Table 1.1, http://www.eia.doe.gov/cneaf/electricity/epa.pdf

and Electric Power Monthly, November 2004, Table 1.1.a, http://www.eia.doe.gov/cneaf/electricity/epm/epm.pdf, accessed December 15, 2004. 

Wind (13%) 

Geothermal (16%)

71%

Hydro

7%

Nuclear

20%

Non-Hydro Renewables 

2%

Fossil Fuels

2.2 Federal Non-hydro Renewable Energy Policies 

Federal policies used to promote renewable energy have included financial incentives, regulatory measures, and research and

development (R&D) programs. 

2.2.1 Regulatory Measures and Financial Incentives 

In response to energy security concerns of the mid-1970s, the United States passed the National Energy Act of 1978 (NEA), 

which sought to decrease the Nation’s dependence on foreign oil and increase domestic energy conservation and efficiency.10

The Public Utility Regulatory Polices Act (PURPA) of 1978, part of the NEA with a stated purpose of improving energy

conservation and energy efficiency in the utilities sector, also had major impacts on the development of renewable electricity.11 

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PURPA opened the door to competition in the electricity supply of the United States by requiring utilities to buy electricity from

qualifying facilities (QFs), which are defined as nonutility facilities that produce electric power using cogeneration technology

or renewable power plants with capacities of less than 80 MW. Utilities are required to purchase power from qualifying facilities 

at the utilities’ “avoided cost.” The interpretation of “avoided cost” was left up to individual States. This resulted in a number of

7

 Central Intelligence Agency, The World Factbook 2004, “United States,” http://www.cia.gov/cia/publications/factbook/geos/us.html, 

accessed May 19, 2004. 8

 Energy Information Administration, Electric Power Annual, 2003, December 2004, Table 1.1, 

http://www.eia.doe.gov/cneaf/electricity/epa.pdf, accessed December 15, 2004. 9

 Database of State Incentives for Renewable Energy, “Summary Tables Overview,”

http://www.dsireusa.org/summarytables/index.cfm?&CurrentPageID=7, accessed May 19, 2004. 10 Gielecki, Mark; Mayes, Fred; and Lawrence Prete, “Incentives, Mandates, and Government Programs for Promoting Renewable Energy,”

February 2001, Energy Information Administration, http://www.eia.doe.gov/cneaf/solar.renewables/rea_issues/incent.html, accessed May 19,

2004. 

11 U.S. Government Printing Office. Compilation of Selected Energy-Related Legislation: Electricity. Washington, DC, 1991. Page 115. 
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different regimes, some of which, as in California and New York, were particularly favorable to renewables. California based its 

avoided cost calculations on forecasts of natural gas and oil prices, which were higher than prices actually turned out to be, 

resulting in favorable investment conditions for renewable power. 12 However, in 1995, the Federal Energy Regulatory 

Commission (FERC) took responsibility for interpreting “avoided cost,” directly linking it with the costs a utility would incur

either generating the power directly or purchasing it from another supplier. This interpretation resulted in lower avoided costs 

than the interpretations of some states, including California.13

The United States has also used financial incentives to try to spur the growth of renewable energy. The 1978 Energy Tax Act 

(ETA), part of the NEA, included a 30-percent investment tax credit for residential consumers for solar and wind energy 

equipment and a 10-percent investment tax credit for business consumers for the installation of solar, wind, geothermal, and 

ocean thermal technologies. Although the level of these tax credits changed over time until their expiration in 1985, the 

fundamental policies were developed with the passage of the ETA.14

The most important law promoting renewable energy in the 1990s was the Energy Policy Act (EPACT) of 1992. EPACT 

established a 10-year 1.5 cents per kWh inflation-adjusted15 production tax credit (PTC) for tax-paying privately and investorowned wind projects and closed-loop biomass plants brought online between 1994 and 1999. The incentive expired in 1999, but 

has since been renewed twice, in 1999 and 2001, before its expiration at the end of 2003. Late in 2004, it was extended again 

through 2005. This latest extension increased the number of renewable technologies that are covered by the incentive. 

Figure 2 illustrates the relationship between wind capacity in the United States and the PTC. Although the graph depicts total 

installed capacity in the United States, nearly all the windpower capacity was in California until the 1990s. EPACT also created 

a Renewable Energy Production Incentive (REPI) for electricity generated from biomass, geothermal, wind, and solar from taxexempt publicly owned utilities and rural cooperatives. Unlike the PTC, the funding available through REPI is subject to annual

congressional appropriations, thereby making the availability and level of the credit uncertain. 

While EPACT significantly improved the economics of windpower, another U.S. policy, implemented thus far at a State level, 

has been more beneficial to the installation of solar photovoltaic generation. This policy is net metering, which allows small 

producers of renewable energy from selected sources to sell their power back to the grid.16 The buyback rate is determined by 

law and is frequently equal to the retail electricity rates, or sometimes slightly less than retail rates.17 Net metering programs are 

designed for small electricity customers (residential or small commercial) who produce their own power to bank power on the 

grid in times of surplus and draw down from the grid in times of need. As of September 2004, net metering was available in 32 

States and the District of Columbia.18 Most States set size limits on systems for net metering eligibility with many States having 

capacity limits around 25 kilowatts (kW), though limits vary from 10 kW in New Mexico to 1,000 kW in California.19

2.2.2 Research and Development20

Government investments in energy RDD&D (research, development, demonstration, and deployment) are intended to accelerate 

the development and introduction of technologies and practices that provide social benefits, such as increased energy security,

reduced energy costs, or reduced pollution associated with energy use. The focus in the Department of Energy’s (DOE) 

renewable energy programs is on technologies that would be developed more slowly or not at all if they depended only on 

current private-sector incentives and interests. Consequently, these investments serve as a support program for nascent 

industries because, when successful, R&D reduces the capital and/or operating costs of new products or processes. 

The DOE renewable energy programs are implemented in several ways: through direct funding of R&D at national laboratories, 

through grants and cooperative agreements with universities, and through various forms of financial and technical assistance to

industry partners. In general, the industry partnerships, a prominent part of renewables R&D funding since the mid-1980s, are 

cost-shared; that is, the industry partner provides a portion of the funding or other resources needed for the work. The cost12 Gielecki, Mark; Mayes, Fred; and Lawrence Prete, “Incentives, Mandates, and Government Programs for Promoting Renewable Energy,” 

February 2001, Energy Information Administration, http://www.eia.doe.gov/cneaf/solar.renewables/rea_issues/incent.html, accessed 

November 19, 2004. 

13 In 1995, FERC defined avoided costs as, “...the incremental costs to an electric utility of electric energy or capacity or both which, but for 

the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source.” FERC, 

“18 CFR Part 292 Regulations Under Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978 With Regard to Small Power 

Production and Cogeneration,” accessed November 19, 2004. 

14 For more information on how these incentives changed over time, please see: Gielecki, Mark; Mayes, Fred; and Lawrence Prete, 

“Incentives, Mandates, and Government Programs for Promoting Renewable Energy,” February 2001, Energy Information Administration, 

http://www.eia.doe.gov/cneaf/solar.renewables/rea_issues/incent.html, accessed November 19, 2004. 15 Due to the inflation-adjustment provision, the 2005 renewal of the PTC allows for 1.8 cents per kWh. 16 Some States limit eligibility to photovoltaic systems while others permit all small renewable facilities to participate. 

17 DSIRE, “Net Metering Rules,” http://www.dsireusa.org/library/includes/seeallincentivetype.cfm?type=Net¤tpageid=7&back=regtab, 

accessed June 8, 2004. 

18 DSIRE, “Rules Regulations and Policies,” http://www.dsireusa.org/summarytables/reg1.cfm?&CurrentPageID=7, accessed June 8, 2004. 19 DSIRE, “Net Metering Programs,” http://www.dsireusa.org/library/docs/NetMetering_Map.doc, accessed January 12, 2005. 20 This section is adapted from information provided by Sam Baldwin, Peggy Podolak, and Randy Steer, of the Office Energy Efficiency and 

Renewable Energy, U.S. Department of Energy. 
sharing can be in the form of direct financial contributions towards the costs of the R&D, or it may be "in kind," meaning that a 

value is ascribed to some facility or equipment that the industry provides for the effort, or, in the case of the government, the 

industry partners' use of DOE's national laboratories. The degree of cost-sharing is negotiated and depends on many factors,

such as the technology's technical risk (the higher the risk, the greater the government’s share) and nearness to commercial

readiness, the degree to which the government believes that industry has incentives to do the work on their own, and the size of 

the industry partner. (Small businesses are sometimes provided a higher share of costs than large businesses, at least in early

stages of technology development.) Although national laboratories negotiate licensing fees or royalties when they license a 

technology they have developed to industry, the renewable energy R&D program itself has not required any repayment or

royalties from industry partners when jointly-funded R&D leads to commercial success. In partnering programs, DOE also 

works with the ultimate product consumer to determine desired product characteristics and feeds this information back to its 

partners. 

Figure 2. Wind Capacity & Major U.S. and State Policies, 1980-2003

0

1

2

3

4

5

6

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

U.S. Installed Wind Capacity (GW)

1st PTC expiration

2nd PTC expiration

3rd PTC expiration

Federal Wind Investment Tax Credit (ITC)

 passed (1980); 5-Yr Depreciation

 allowed (1981)

Production Tax Credit (PTC) Authorized

California Standard Offers start

W FERC Rules against CA Std. Offers ind ITC expires

California Interim

Standard Offers (ISO4) Terminated

 GW = Gigawatts

 FERC = Federal Energy Regulatory Commission

 Sources: Wind Capacity, 1981-1989, California Energy Commission, Draft Final Report, "California Historical Energy 

Statistics," January 1998, P300-98-001; 1990-2002, Energy Information Administration, Annual Energy Review 2002, Table 

8.7a; Policies compiled by Office of Integrated Analysis and Forecasting, Energy Information Administration.

2.3 California 

Until the early 1990s, nearly all growth in non-hydro renewable capacity in the United States took place in California. In more 

recent years, other States have begun pursuing policies to increase non-hydro renewable generation, particularly States are 

developing Renewable Portfolio Standards (RPS). However, most of these initiatives are still relatively new and their impact on 

non-hydro renewable generation is still unclear. For a review of current State RPS policies, renewables mandates and targets, 

see “State Renewable Energy Requirements and Goals: Status Through 2003.”21 A comprehensive overview of State 

renewable energy incentives is provided in the Database of State Incentives for Renewable Energy.22 Because this paper 

examines historical trends in non-hydro renewable generation, it is instructive to examine California’s policies that, along with

Federal statutes, encouraged the development of non-hydro renewable energy there. Needless to say, the Federal laws described 

above—particularly PURPA and EPACT—have had a significant influence on the development of renewable energy in

California. However, many laws enacted at the State level have also significantly affected the development of renewables in

California. 

 

21 Energy Information Administration, http://www.eia.doe.gov/oiaf/analysispaper/rps/index.html, accessed January 5, 2005. 

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22 Database of State Incentives for Renewable Energy, http://www.dsireusa.org, accessed January 5, 2005. 
2.3.1 Background 

California is the most populous state in the United States, with about 35 million people spread out over 150,000 square miles. 

California produced 277 billion kWh of electricity in 2003 and imported 22 percent of its electricity needs.23 Of the electricity 

generated within the State, 58 percent was generated from fossil-fuel sources, 15 percent from nuclear power plants, 18 percent

from large- and small-scale hydropower plants, and about 9 percent from other renewables (Figure 3). Most of the non-hydro

renewable power was generated by geothermal energy, with smaller amounts from biomass, wind energy, and solar.

24

 Source: California Energy Commission, “California Gross System Power for 2003,” 

http://www.energy.ca.gov/electricity/gross_system_power.html, accessed August 12, 2004. 

Wind (15%) 

Biomass (24%) 

Geothermal (58%) 

Solar (3%)

18% 

Hydro 15% 

Nuclear 

9% 

Non-Hydro Renewables

Fossil Fuels 

58% 

Figure 3. California Electricity Generation, 2003 

2.3.2 History of Non-hydro Renewable Energy Policies in California 

Early Activity

California began providing tax incentives for installing renewable technologies—particularly solar energy devices—in 1976

with a 10-percent investment tax credit.25 Two years later, the amount of this investment credit was increased to 55 percent. The

investment credit was consistently extended (though the periodic extensions did create uncertainty in the market) through 1986 

for wind energy projects and into the 1990s for other renewable projects.

26 This State incentive was in addition to Federal 

incentives for the construction and use of renewable energy technologies that were offered between 1978 and 1985. In 1978, 

California started the Wind Energy Program with a target of having 500 MW of wind capacity installed by the mid-1980s.27

Although the Federal government was also funding R&D for wind energy technologies at this time, the California Energy

Commission (CEC) wanted to explore a wider range of designs than were eligible for the Federal program. As such, it funded

several turbine projects to determine the efficacy of different designs.28 

Market Development 

In the early 1980s, California moved from funding strict R&D projects for wind energy to focusing on demonstration projects 

for wind turbines. These demonstration projects resulted in design improvements that helped to bring costs down for wind 

energy developers. Throughout this period, the focus was on relatively small machines compared to the multi-megawatt R&D

efforts at the Federal level.29 

- 9 - 

 

23 California Energy Commission, http://www.energy.ca.gov/electricity/gross_system_power.html, accessed August 12, 2004. 24 California Energy Commission, “California Gross System Power for 2003,” http://energy.ca.gov/electricity/gross_system_power.html, 

accessed August 12, 2004. 

25 For a comprehensive list of current renewable energy incentives in California, see,

http://dsireusa.org/library/includes/map2.cfm?CurrentPageID=1&State=CA, accessed June 2, 2004. 26 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University. 

September 2001, Chapter 5. 27 Ibid, Appendix 5. 28 Dodge, Darrell M, “Illustrated History of Wind Power Development,” http://telosnet.com/wind/recent.html, accessed August 12, 2004. 29 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University. 

September 2001, Chapter 5.
- 10 - 

 

In 1982, California’s Public Utilities Commission (CPUC) articulated California’s interpretation of the term “avoided cost” as 

used in PURPA. The interpretation was based on long-term avoided costs partially derived from forecasts of natural gas and oil

prices. The price reverted to the actual avoided cost after the first 10 years. However, actual avoided cost turned out to be much 

less than contract costs because oil prices had fallen significantly during the mid-1980s. Thus, after the initial 10-year period, 

the price that wind producers were receiving dropped dramatically in what is sometimes called the “11–year cliff.”30 In 1982, 

the CPUC created the “Standard Offer” contracts (Numbers 1-3) to secure renewable electricity generation. The contracts were 

10-year power purchase agreements for a price of 6.9 cents per kWh. The contracts were based on the notion that there should 

be no difference in electricity rates regardless of whether the electricity was generated by a utility or by a qualifying facility.31

The next year, CPUC authorized Interim Standard Offer Number 4 contracts (ISO4), which were granted for periods of 15-30 

years, with prices guaranteed for the first 10 years. The majority of California’s wind energy capacity was installed through this 

program, starting in late 1983. Wind energy projects began reaching the “11-year cliff” in 1992. The “cliff” reduced the 

profitability of California wind developments after their first 10 years of operation. 

Nonetheless, by 1985, mostly via ISO4, California had installed 1,000 MW of wind capacity.32 By 1990, this had increased to 

1,799 MW of wind capacity, which was more than half the world’s total at that time.33 

In 1996, California established net metering laws for residential customers who installed solar energy or small-scale wind 

energy systems of up to 1 MW.34 Eligibility was extended to biogas digesters in 2002 under a pilot program. Utilities are only 

required to enroll customers in net metering up to one-half of a percent of peak electricity demand, a provision which limits the 

financial burden of net metering on the utilities.35 Finally, the buyback rate for net metering in California is equal to the retail 

electricity price, and State law prohibits the utilities from charging net metering consumers interconnection fees.36 

To further support the installation of smaller-scale renewable energy projects, California instituted the Emerging Renewables 

Buydown Program in 1998. The program helps residents and small commercial establishments pay for the initial investment in 

renewable technology. Buydown rates vary between $2,000 and $3,600 per kW, depending on the size of the system and the 

type of technology used.37

In 1999, California began offering a 1.5 cents per kWh customer credit for purchasing renewable electricity. The rebate was 

reduced to 1 cent per kWh in 2000, with a ceiling of $1000 per year.38 This incentive is similar to the demand-pull incentive 

(Ecotax exemption) used in the Netherlands, described in the next chapter, though it has not been as successful in increasing the 

demand for non-hydro renewable electricity. 

In 2002, California introduced an RPS requiring utilities to purchase 20 percent of electricity from renewable generators by 

2017. All non-hydro renewable sources are eligible, as well as small-scale hydropower and municipal solid waste if it is not 

combusted. To reach 20 percent, utilities are expected to increase the proportion of power they get from renewable generators 

by at least 1 percent each year through 2017.39 The CEC estimates that by 2017 California will need to generate 30,610 billion 

kWh of non-hydro renewable generation in addition to the approximately 2,500 billion kWh of non-hydro renewable generation 

in 2003 to meet the RPS requirement.40

30 Chapman, Jamie; Wiese, Steven; DeMeo, Edgar; and Adam Serchuk, November 1998, “Expanding Wind Power: Can Americans Afford 

It?” Renewable Energy Policy Project Research Report, No. 6, http://solstice.crest.org/ 

repp_pubs/pdf/chapman.pdf, accessed May 18, 2004. 31 California Public Utilities Commission. 1993, “California’s Electric Services Industry: Perspectives on the Past, Strategies for the Future,” 

http://www.ucei.berkeley.edu/Restructuring_Archive/Yellow_book.pdf, accessed May 18, 2004. 32 Energy Information Administration, “Wind Power Milestones,” 

http://www.eia.doe.gov/cneaf/solar.renewables/renewable.energy.annual/backgrnd/chap10l.htm, accessed May 17, 2004. 33 Energy Information Administration, Annual Energy Review 2003, DOE/EIA 0384(2003) September 2004. 34 DSIRE, “Net Metering Rules—California,” 

http://www.dsireusa.org/library/includes/incentivesearch.cfm?Incentive_Code=CA02R&Search=TableType&type=Net&CurrentPageID=7, 

accessed June 8, 2004. 

35 Ibid, accessed June 8, 2004. 

36 Ibid, accessed June 8, 2004. 

37 California Consumer Energy Center, “Current Rebate Levels—Emerging Renewables Program Rebates,” 

http://www.consumerenergycenter.org/erprebate/2004-01-08_curnt_rebate.html, accessed June 8, 2004. 38 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 5. 

39 Database of State Incentives for Renewable Energy, “California Incentives for Renewable Energy,” 

http://www.dsireusa.org/library/includes/map.cfm?State=CA&CurrentPageId=1, accessed May 18, 2004. 40 California Energy Commission, Renewable Resources Development Report, http://www.energy.ca.gov/reports/2003-11-24_500-03-

080F.pdf, accessed January 7, 2005. 
3. Non-hydro Renewable Energy Policy in Selected Foreign Countries 

This chapter presents the renewable energy policies of four countries: Germany, Denmark, the Netherlands, and Japan, and 

compares them to similar policies in the United States. 

3.1 Germany

3.1.1 Background 

Germany41 has a population of 82 million in a land area slightly smaller than that of Montana.42 Although Germany’s economy 

and electrical grid are smaller than those of the United States, it is one of the largest economies in the world. Non-hydro 

renewable power generation in Germany decreased over the period 1980 through 1987, declining from 5.2 billion kWh in 1980

to 3.8 billion kWh in 1987. After 1987, however, non-hydro renewable generation has consistently increased each year, 

regaining 1980 levels in 1991. Installed non-hydro renewable electricity generation capacity in Germany was very small until 

the early 1990s, when installation of wind turbines and solar panels began to increase. Between 1987 and 1997, German nonhydro renewable generation grew at about 10 percent per year to nearly 10 billion kWh. During this time, non-hydro renewable 

generation’s installed capacity grew by a factor of 20, from less than 100 MW in 1987 to more than 2,000 MW in 1997.

43

Germany also has the most installed wind capacity in the world, with more than 14,500 MW at the end of 2003.

44 

In 2002, Germany generated 72 billion kilowatthours of electricity, of which about 63 percent was from fossil fuels.45 (See 

Figure 4.) Germany generated about 29 percent of its electricity from nuclear power, about 4 percent from hydropower, and 

about 5 percent from non-hydro renewable sources.46 The contribution of renewables has increased since 2001, mainly due to

windpower. Over 3,200 MW of wind capacity were added in 2002, followed by another 2,645 MW in 2003, bringing total

installed capacity to 14,609 MW.

47

Figure 4. German Electricity Generation, 2002

Fossil Fuels

63%

Hydro

4%

Nuclear

29%

Non-Hydro Renewables 

5%

Source: International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, 

Paris. 

Biogas (8%) 

Solid Biomass (3%) 

Waste (43%) 

Wind (45%) 

PV (1%) 

Germany became interested in spurring the growth of renewable energy in the 1970s during the energy crisis brought on by the 

high cost of imported oil. Germany used a variety of policies to reduce oil imports, including subsidizing domestic coal, 

increasing the import quota on coal, expanding nuclear generation, and increasing research and development for new energy

- 11 - 

 

41 Throughout this section, “Germany” refers only to West Germany for dates before 1990, and to unified Germany for all dates thereafter. 42 Central Intelligence Agency, The World Factbook 2004, “Germany,” http://www.cia.gov/cia/publications/factbook/geos/gm.html#top, 

accessed April 26, 2004. 43 Capacity growth figures are based on data from IEA, 2003, IEA Wind 2002 Annual Report, Chapter 8: Germany, These figures differ from

non-hydro renewable capacity data as listed by EIA, which can be found at http://www.eia.doe.gov/pub/international/iealf/table64g.xls. 44 EWEA, “Wind Power Installed in Europe by End of 2003,” http://www.ewea.org/documents/europe_windata_jan20041.pdf, accessed April 

26, 2004. 45 International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris. 46 Ibid. 

47 American Wind Energy Association, March 2004, “Global Wind Energy Market Report,” 

http://www.awea.org/pubs/documents/globalmarket2004.pdf, accessed April 28, 2004. 
technologies (mainly renewables).48 (See Figure 5.) Although the development of renewable-generated power was initially

driven by a desire to reduce dependence on foreign oil, current renewable energy policies are developed with the goal of

reducing air pollution and carbon dioxide emissions. More recently, the German government announced its intentions to phase 

out nuclear power over the next 2 decades, a move that will probably continue to drive demand for renewable energy in the 

future.49 Since 1998, the Green Party has been part of the ruling coalition in Germany and has had a major role in affecting the 

country’s energy and environmental policies.50 

Germany and the United States enacted similar policies to promote the growth of renewable energy. However, Germany has 

surpassed U.S. installed wind capacity, despite the smaller size of the German grid. This section examines the similarities and

differences between the United States and German approaches to renewable energy. 

Figure 5. Germany's Non-hydro Renewable Energy Policies and Growth, 1980-2002

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Non-hydro renewable generation as a percent of total net generation

250 kW Prototype Program for wind

100 MW program extended to 250 MW

100 MW Demonstration Program & Subsidy

Electricity Feed-In Law

1,000 Roof PV Program

Renewable Energy Law

100,000 Solar Roofs Program

 kW = Kilowatts

 MW = Megawatts

 PV = Photovoltaic

 Sources: Generation, Energy Information Administration, International Energy Annual; Policies, various sources compiled for and cited in

this article by Office of Coal, Nuclear, Electric and Alternate Fuels, Energy Information Administration.

3.1.2 Research, Development, and Demonstration (1974-present) 

Wind 

Germany invests significant resources into the development of renewable energy. As in the United States, early R&D into wind 

turbines was completely government-funded and conducted by companies in the aerospace industry. From 1975 through 2000, 

Germany spent about $215 million (1995 dollars) on R&D of wind turbine technology. Funding levels for wind R&D varied 

from year to year, peaking at more than $28 million (1995 dollars) in 1980 and 1981 before declining and leveling off in the 

early 1990s at about $6 million (1995 dollars) per year.

51 While funding levels for wind R&D were higher in the United States, 

 

48 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 7A. 49 International Energy Agency, 2002, Energy Policies of IEA Countries: Germany, Paris: OECD. 50 Energy Information Administration website: http://www.eia.doe.gov/emeu/cabs/germe.html#ENVIRO, accessed June 23, 2004. 51 Ibid. Appendix 7b. 

- 12 - 
- 13 - 

 

year-to-year R&D expenditures followed a similar path in the two countries, peaking in FY 1981, declining and leveling off 

over the next decade, and then increasing beginning in FY 1992.52

Germany began the 250-kW Prototype Program for wind turbines in 1986. The program subsidized the first five turbines of a 

company after the prototype was constructed and tested.53 Although more than 50 commercial wind turbines were installed 

under that program, costs remained too high for market conditions in Germany at the time. This was followed, in 1989, by the 

100-MW Demonstration Program, which provided a subsidy of 0.08 Deutsche Marks (DM) per kWh (4.3 cents U.S.) for windgenerated electricity by turbines accepted into the program.54 Participants could choose either this production subsidy, or a 60-

percent capital investment grant for the cost of the facility.55 Due to its popularity, this program was expanded in 1991 to the 

250-MW Wind Program.56 By mid-year 1991, more than 2,300 applications for a proposed capacity of 520 MW had been 

received, and by 1998 more than 350 MW of wind-generated electricity had come onto the national grid.57 These latter 

programs, with their focus on large turbines, mirrored the wind energy efforts in the United States. Therefore, the wind R&D 

programs in the two countries were very similar in their funding patterns and their focus. 

Photovoltaic 

In 1990, the German government began the “1,000 Roof” program, which sought to move some of the government’s renewable 

energy focus away from R&D and towards demonstration projects.58 Between 1991 and 1994, this program installed about 5.25 

MW of PV panels and successfully field-tested the grid installation of more than 2,000 PV systems.59 After 1994, many Federal 

States and municipalities became involved in advancing the development of PV panel systems. State and local incentive 

programs contributed to the installation of an additional 6 MW of solar photovoltaic capacity by 1999.60

To further promote the development of PV power, Germany passed the 100,000 Solar Roofs Program in 1999. The program 

provides low-interest loans for PV systems. In combination with the Renewable Energy Law that was passed in 2000, the 

100,000 Solar Roofs Program increased PV capacity from less than 50 MW installed in 1997 to about 400 MW installed by 

year-end 2003.61

3.1.3 Electricity Feed-In Law (1991) and Renewable Energy Law (2000) 

Germany’s Electricity Feed-In Law, enacted in 1991, changed the market conditions for renewable electricity producers by 

obligating utilities to buy renewable electricity and by dictating the price that renewable electricity producers would receive for 

their power. Utilities were required to buy renewable power at 90 percent of the retail rate for electricity. This law did two 

important things for renewable electricity producers in Germany. First, it created a market for renewable electricity. Second, it 

guaranteed producers of renewable electricity a sustainable price high enough to cover their long-term costs. Both of these 

factors combined to make renewable electric generating capacity a better investment. 

In many ways, PURPA is similar to Germany’s Feed-In Law. They both require utilities to purchase electricity from nonutility 

renewable producers, and they both define (if loosely, in the United States) the price at which the transaction will take place. A 

difference, however, is that in the United States, calculations of “avoided cost” tended to be lower and closer to market 

wholesale electricity rates than the higher fixed-price German utilities are required to pay to renewable electricity producers.

62

This means that in Germany, where the price paid to producers of renewable energy was higher, new renewable technologies 

52 Energy Information Administration website, Department of Energy Historical R&D Budget Fiscal Years 1978-1999: 

http://www.eia.doe.gov/cneaf/solar.renewables/rea_issues/reatabp1.html, accessed June 23, 2004. 53 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 7A. 

54 Ibid. Conversion from DM to US currency based on historical exchange rates averaged over 1989 as found at FX History, 

http://www.oanda.com/convert/fxhistory, accessed April 22, 2004. 55 Office of Technology Assessment, September 1995, Renewing Our Energy Future, OTA-ETI-614, http://www.wws.princeton.edu/cgibin/byteserv.prl/~ota/ns20/year_f.html, accessed April 22, 2004. 56 Gipe, Paul, 1999, “Latest Data from Germany’s 250 MW Measurement Program 1999,” Appeared in WindStats 12(4), http://www.windworks.org/articles/German250MW.html. Accessed April 27, 2004. 57 Office of Technology Assessment, September 1995, Renewing Our Energy Future, OTA-ETI-614, http://www.wws.princeton.edu/cgibin/byteserv.prl/~ota/ns20/year_f.html, accessed April 22, 2004, Gipe, Paul, 1999, “Latest Data from Germany’s 250 MW Measurement 

Program 1999,” Appeared in WindStats 12(4), http://www.wind-works.org/articles/German250MW.html. Accessed April 27, 2004. 58 Office of Technology Assessment, September 1995, Renewing Our Energy Future, OTA-ETI-614, http://www.wws.princeton.edu/cgibin/byteserv.prl/~ota/ns20/year_f.html, accessed April 22, 2004. 59 Weiss, Ingrid and Peter Sprau, 2002, “100,000 roofs and 99 Pfennig—Germany’s PV financing schemes and the market,” Renewable 

Energy World Jan-Feb 2002, http://www.jxj.com/magsandj/rew/2002_01/weiss.html, accessed April 27, 2004. 60 Ibid., accessed April 27, 2004. 

61 Stein, Christof, Presented March 8, 2004 at Photovoltaic Workshop in Rome, “The Experience of Germany on Photovoltaic Incentives,” 

Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety, http://www.elettronet.it/ 

browse.asp?goto=455&livello=2&IdDocumento=21545&IdRevisione=28941, accessed April 27, 2004. 62 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Chapter 8. 
- 14 - 

 

became competitive earlier. Additionally, while the buyback rate for renewable power in Germany was linked to future retail

prices, in California, buyback rates for the first 10 years were linked to projections of future oil and natural gas prices. After 10 

years, buyback rates reverted to actual costs, which were much lower, thereby decreasing the rates (premiums) paid to 

renewable power producers. 

Another major difference between Germany’s Feed-In Law and the U.S. PURPA is that the main purpose of the Feed-In Law 

was to promote the use of renewable resources, while the main purpose of PURPA was to promote energy efficiency. In the 

United States, before FERC interpreted the meaning of “avoided cost” in 1995, PURPA also promoted the development of 

renewables in States with favorable “avoided cost” calculations (like California). However, after FERC’s interpretation of 

“avoided cost,” the law became less favorable to renewable producers, but was still useful in its original purpose of promoting

efficient nonutility electricity generation. 

Since the U.S. net metering programs63 obligate utilities to purchase renewable power, they can be compared to Germany’s 

Feed-In Law. Although net metering allows consumers to sell excess electricity back to the grid, the policy is not analogous to

Germany’s energy policies, which obligate utilities to purchase renewable power from private producers, regardless of their 

size. The German law encourages much larger contributions to the grid from private renewable energy producers. 

In 2000, Germany passed the Renewable Energy Law, which set specific prices that independent renewable power producers 

could receive for each type of renewable energy source, although for a limited amount of time. For instance, in 2000, a new 

wind turbine project would be paid 0.178 DM per kWh (U.S. 11 cents per kWh) for the first 5 years and then the rate would 

begin to fall. The decreasing nature of the prices is reflective of Germany’s expectation that these projects would become 

increasingly cost-competitive. The buyback tariff rate for PV systems was € 0.51 per kWh (U.S. 45 cents per kWh) and was set 

to decrease by 5 percent annually.64,65 Finally, this law also dictates that the costs of grid connection for renewables projects are 

the responsibility of the utility, which can pass on the costs to consumers.66 This new law, while still dictating the buyback rates 

paid by utilities, can more precisely target each renewable energy technology with a buyback rate designed to further its growth. 

Since each technology’s cost of generation differs, the support necessary to make it competitive in the market varies. 

It is clear that while the German Feed-In Law had a significant positive effect on the development of renewable electricity 

generation in Germany, PURPA did not have a similar effect throughout the United States. While some States, including 

California, did manage to install new renewable electric generation capacity, PURPA was a necessary measure but not a 

sufficient incentive for investors to develop new renewable energy projects.67 

One reason that PURPA did not have a similar effect as Germany’s Feed-In Law could be timing. The wind industry was 

significantly more developed, both in terms of technology and in terms of costs, in 1991 when Germany passed its Feed-In Law 

than in 1978 when PURPA was passed. Given that, subsequent development of wind turbines in the United States was 

undertaken with the relatively inefficient machines of the early 1980s, while post-Feed-In-Law wind turbines in Germany were 

both cheaper and more advanced. If the timing of PURPA versus Germany’s Feed-In Law was the only consideration, one 

would have expected the U.S. market to begin to grow as technological advances in turbine designs brought costs down. 

However, even with the advances in turbine technology, PURPA did not begin to create the kind of market growth associated 

with the Feed-In Law in Germany until additional incentives (in the form of the U.S. Production Tax Credit, among others) were 

added in 1992. 

3.2 Denmark 

3.2.1 Background 

Denmark is a small country compared with the United States, with a population of just 5.3 million spread over a land area about

twice the size of Massachusetts (16,000 square miles).68 Although it is interconnected with the larger European electric system, 

its own electric grid is small relative to that of the United States. Denmark generates about 18 percent of its electricity from 

renewable sources—the largest percentage in the world. 

63 Database for State Incentives for Renewable Energy, http://www.dsireusa.org/glossary/glossary.cfm?&CurrentPageID=8#net, accessed 

April 26, 2004. 

64 € denotes the symbol for the Euro, the basic unit of currency among participating European Union countries. 65 Weiss, Ingrid and Peter Sprau. 2002. “100,000 roofs and 99 Pfennig—Germany’s PV financing schemes and the market.” Renewable 

Energy World Jan-Feb 2002, http://www.jxj.com/magsandj/rew/2002_01/weiss.html, accessed April 27, 2004. 66 Sawin, Janet. “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000.” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University. 

September 2001. Appendix 7A. 

67 See discussion on California’s Standard Offer Contracts in section 2.3.2 for more information about additional state-incentives that 

supplemented PURPA.

68 Central Intelligence Agency, The World Factbook 2004, “Denmark,” http://www.cia.gov/cia/publications/factbook/geos/da.html#top, 

accessed on April 19, 2004. 
Figure 6. Danish Electricity Generation, 2002 

Biogas (3%) Hydro 

<1%

Non-Hydro Renewables

17%

Solid Biomass (13%) 

Waste (15%) 

Fossil Fu

83%

els

Wind (69%) 

0%

Source: International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris. 

In 2002, Denmark generated 39 billion kilowatthours of electricity, of which 83 percent was from fossil fuels.69 (See Figure 6.) 

Denmark has less than 10 MW of hydropower capacity, so the remaining 17 percent is from other renewable energy sources, 

primarily wind.

70 

Denmark began pursuing renewables as a source of energy in the mid-1970s as a response to high prices for oil imports. The 

program began with funding for research and development, but turned more toward developing the industry when, in 1979, the 

government began offering an investment subsidy for up to 30 percent of the cost of wind turbines, biogas digesters, and solar 

panels.

71 Although reducing Denmark’s dependence on foreign oil is still relevant, this has taken a back seat to measures 

enacted by Denmark to protect the environment. Particularly important has been the goal of reducing carbon dioxide emissions 

to comply with Denmark’s commitments to the European Union (EU). 

Since the 1970s, the Danish government has been consistent in passing and funding its renewable energy policies, thereby

fostering an environment of relative certainty for developers. Two factors drive this consistency in policymaking. First, Danes

have an environmental consensus that has led them to develop energy in what they consider to be a more sustainable manner.

Second, the wind industry in Denmark developed with a system of cooperative ownership of turbines, which gives farmers and

nearby landowners an interest in projects. Individuals or local cooperatives own about two-thirds of land-based wind turbines in 

Denmark.72 Cooperatives have reduced local opposition and generated a voting public with a stake in the wind industry. 

Denmark pursued five main policies (in bold in Figure 7)73 to encourage the development of renewable energy between 1975

and 2000. In addition to these policies, Denmark also made more general energy policy decisions, such as the 1985 decision not 

to pursue nuclear power, that have also had implications for the development of renewable energy in Denmark. This section will 

examine each policy and compare its provisions to similar policies in the United States. 

 

69 International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris. 

70 Ibid. 

71 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 6. 72 Gipe, Paul, 1995, Wind Energy Comes of Age, John Wiley & Sons, Inc: New York. 

- 15 - 

73 Please note that the fluctuations in the graph between 1990 and 1996 are a reflection of dramatic swings in total net electric generation, not 

variability in non-hydro renewable generation, which consistently increased between 1990 and 1996. 
0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

Non-hydro renewable gen. as a percent of total net generation

Investment credit (30%) offered 

for renewable technology

Investment credit ends for wind turbines

Generation subsidy for turbine owners

with inverse relationship to energy tax

Energy 81 goal of 1.3 TWh of renewable 

electricity by 1995.

Decision: No more nuclear power

Danish Wind Turbine Guarantee

Danish Energy Plan 2000 goal of 1,500

MW of installed capacity by 2005.

· Utilities obligated to buy renewable power

· Carbon dioxide tax with subsidy for renewable producers

· Generation subsidy for private renewable producers

Decision:

No new

coal plants

Electricity market liberalization/deregulation begins

Energy 21 goal 5,500 

MW of wind capacity 

in 2030

Figure 7. Denmark’s Non-hydro Renewable Energy Policies and Growth, 1979-2002

 TWh = Terawatthours

 MW = Megawatts

 Sources: Generation, Energy Information Administration, International Energy Annual; Policies, various sources compiled for

and cited in this article by Office of Coal, Nuclear, Electric and Alternate Fuels, Energy Information Administration.

•

3.2.2 Investment Subsidy (1979-1989)

Denmark’s investment subsidy allowed individuals to be reimbursed for capital costs of wind turbines, solar panels, and biogas 

digesters. The subsidy was available from 1979 to 1989 and declined gradually over that period from 30 percent to 10 percent.

74

In 1978, the United States enacted the Energy Tax Act of 1978, which provided a 10-percent tax credit for investment in wind, 

solar, geothermal, and ocean thermal technologies. This investment tax credit (ITC) changed over time, though the basic 

provisions remained the same. The U.S. ITC contributed to the California wind energy construction boom in the early 1980s, as 

favorable interpretation of PURPA’s “avoided costs” combined with multiple Federal investment incentives to make wind

energy a profitable investment. However, the nature of the ITC, while encouraging wind development, did not stimulate the 

development of the most efficient machines, and many wind turbines stood idle after construction was completed.

Another major difference between Denmark’s investment subsidy and the U.S. ITC is that Denmark used a direct subsidy

reimbursing a fixed percentage of the investment. Denmark’s direct investment subsidy was successful in building its wind 

industry, while the United States’ use of a tax credit did not result in new wind capacity, except in California. With a properly 

calibrated investment subsidy, investors develop renewable energy projects to promote renewable energy rather than to save

money on taxes—a major factor in the level of commitment to the efficiency of wind turbine operation.75 An example of tax 

credits that promote inefficient renewable projects is the combined Federal/California tax credit on wind projects in the early

1980s. The combined tax credit of nearly 50 percent of project cost caused many turbines to be erected that operated at very low 

capacity factors. As soon as the California contract price (Standard Offer 4) expired in the early 1990s, these projects shut down.

Essentially, there were insufficient quality requirements for receipt of the ITC, or, the investment credits were set too high. That

is, there was insufficient incentive to generate electricity.76

- 16 - 

 

74 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 6. 75 Ibid. Chapter 8. 76 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Chapter 8.
- 17 - 

 

3.2.3 Production Subsidy and other Direct Support Mechanisms (1981 and 1992) 

In Denmark, the first production subsidy was introduced in 1981. It was designed to offset the energy tax for wind energy 

producers. In 1992, a flurry of legislation was passed which significantly benefited the wind industry. First, utilities became

obligated to purchase renewable energy from private producers at a fixed price of between 70 percent and 85 percent of the 

retail price of electricity (a price higher than the wholesale price of privately-generated fossil fuel-fired electricity). Second, the 

1981 energy tax was replaced by a carbon dioxide (CO2)-based tax system and the original subsidy became a CO2-related 

subsidy for all renewable energy technologies. The subsidy amounted to 0.10 Danish Kroner (DKK) per kWh (about 1.6 cents 

per kWh in 1992 or 1.2 cents per kWh in 2000) for both private producers and utilities. The net effect of this system is to 

increase the cost of CO2-emitting generation, thereby reducing the relative cost of non-emitting renewable generation. Third, an 

additional production incentive was enacted for private producers of wind-generated electricity in 1992. This production 

incentive was an additional payment of 0.17 DKK per kWh (about 2.8 cents per kWh in 1992 or 2.1 cents per kWh in 2000). 

Thus, between the CO2-related subsidy and the production incentive, private wind energy producers could expect 0.27 DKK per 

kWh (4.4 cents per kWh in 1992 or 3.3 cents per kWh in 2000) in addition to the guaranteed price paid by utilities.77

Although in 1992 these three policies were enacted separately, it is impossible to attribute growth in wind capacity in Denmark

to any individual policy. Taken together, however, their passage in 1992 probably strongly contributed to the 30-percent annual

growth in wind capacity in Denmark between 1996 and 2001. Denmark’s basic guaranteed pricing and utility purchase 

obligations are very similar to those enacted in Germany, but the additional incentives for renewable energy producers in 

Denmark help to make renewable technologies more economic. 

The U.S. PTC/REPI system enacted under EPACT in 1992 differs from Denmark’s production subsidy in a number of crucial 

ways. First, the PTC has had to be renewed by Congress periodically. The original law applied to facilities constructed between

1994 and 1999. After a brief expiration period, the PTC was renewed in 1999 for 2 years, and again in 2001 for 2 years, but the

uncertainty about the future of the PTC is a major factor inhibiting consistent development. However, once a qualifying plant is 

built, the tax credit is certain for the next 10 years, even if eligibility for new plants expires. The REPI is subject to annual 

congressional appropriation, which has limited its effectiveness because public utilities cannot rely on revenue from REPI for 

financing renewables projects even for those plants that have already been built.78

The REPI and the PTC have certainly succeeded in increasing the installed capacity of wind turbines in the United States, from 

less than 2,000 MW in 1994 when the program started, to more than 5,500 MW in 2003. However, the uncertain nature of the 

PTC has created a boom-and-bust cycle for wind development in the United States, as large amounts of capacity are built in the 

year prior to the expiration of the PTC, and virtually no capacity is built when the PTC is not available. By contrast, Denmark’s 

production subsidy remained the same from 1992 through 2000 enabling more consistent growth, and some would argue, a 

stronger domestic wind industry. Some changes are expected in Denmark’s subsidy regime with the new green-certificate 

trading program that began in 2003. 

An additional difference between the U.S. PTC and Denmark’s generation subsidy is that while Denmark’s production subsidy 

is a direct payment, the U.S. PTC is a tax credit. Assuming the value of the direct subsidy (after taxes) and the tax credit are the 

same, the tax credit scheme will favor larger, more diverse businesses if the value of the tax credit is greater than the tax liability 

on eligible generation. For instance, if a wind operator gets paid 3 cents per kWh for the electricity produced, pays taxes at a 

33-percent rate (1 cent), and is eligible for a 1.8-cent-per-kWh tax credit, the amount of the tax credit exceeds the operator’s tax 

liability by 0.8 cents per kWh. But if the company is more diverse and is taxed on additional income from other sources, then 

the company is in a position to take advantage of the full tax credit.79 In this way, the U.S. PTC puts smaller companies at a 

disadvantage. Denmark’s generation subsidy did not have the same effect of favoring larger, more diverse companies. In fact, 

most wind turbines in Denmark are owned by small cooperatives. Also, contributing to local ownership were very favorable 

feed-in tariffs (rate paid for electricity going into the grid) and the availability of flexible financing terms provided by Danish 

banks.80

3.2.4 Domestic Market Support (1990-2000) 

In 1990, the Danish Wind Turbine Guarantee established government-guaranteed long term financing of large wind projects that 

used Danish-made turbines. The program significantly reduced the financial risk of building large wind projects with Danish 

77 Ibid. Appendix 6. 

78 Bird, L.; Parsons, B.; Gagliano, T.; Brown, M.; Wiser, R.; Bolinger M., July 2003, “Technical Report: Policies and Market Factors Driving 

Wind Power Development in the United States,” National Renewable Energy Laboratory, NREL/TP-620-34599. 79 Namovicz, Chris, Office Integrated Analysis and Forecasting, Energy Information Administration, May 13, 2004, Personal Communication. 80 Cohen, Joseph M. and Wind, Thomas A., February 2001, “Distributed Wind Power Assessment,” National Wind Coordinating Committee, 

http://www.nationalwind.org/pubs/distributed/distributed_wind.pdf, accessed November 19, 2004 
- 18 - 

 

turbines and thereby encouraged local manufacturing of wind turbines and turbine components.81 Danish companies 

manufactured almost all of the wind turbine capacity installed in Denmark.82 

In 1994, the government issued a directive to municipalities requiring them to plan for future wind turbine siting, although the 

directive did not create installation quotas for municipalities.83 At the same time, the Danish government sought to reduce the 

public’s resistance to wind turbines by subsidizing the removal of older, inefficient, or loud turbines with new machines. 

Finally, in 1994 and again in 1996, Parliament reduced the restrictions on which individuals can be in a wind turbine 

cooperative. The restrictions were originally designed to encourage many individuals to buy small shares in wind cooperatives 

in their neighborhoods. The loosening of the regulations reflected investors’ desires to own more shares in cooperatives 

throughout Denmark. By 1996, Danish adults could own shares in wind cooperatives of up to 30,000 kWh. 

After a slight decrease in non-hydro renewable capacity between 1990 and 1991, modest steady growth in both non-hydro 

renewable capacity and generation continued until 1996. Generation increased from 1 billion kWh in 1991 to 2.3 billion kWh in 

1996 with a corresponding increase in capacity from 343 MW to 619 MW.84 After 1996, however, the industry grew much more 

rapidly—at more than 30 percent per year—until at least 2002. During this period of rapid growth, no major new policies came 

into force, and the growth is probably due to the industry taking advantage of the incentives initiated in the early 1990s. 

In the late-1990s, Denmark revealed a new energy strategy called Energy 21, which affirmed the 1996 targets for both carbon 

dioxide and wind generation capacity, but also set targets on a longer planning horizon for 2030. By 2030, Denmark wants 

5,500 MW of wind generation capacity with 4,000 MW being offshore. This target corresponds to 50 percent of total Danish 

electricity demand in 2030. As of year-end 2003, wind energy supplied 21 percent of the Danish electricity demand. 

Since 2000, Denmark has begun to turn away from guaranteed pricing and has introduced tradable green electricity certificates. 

Their new goal is to create a market for green power via these certificates, though the policy has not been in place long enough 

to evaluate the efficacy of the scheme. 

The dominance of Danish turbine manufacturers continues. In 2002, the two largest manufacturers of wind turbines worldwide 

were Vestas and NEG Micron, both Danish companies. Together they accounted for 36 percent of the new installations globally 

in 2002 and had a total accumulated installed capacity of 12,131 MW.85 Early data indicate that the two Danish companies 

combined for 32 percent of new installations globally in 2003.86 Vestas and NEG Micron announced a merger in late-2003 and 

will continue to be major players in the world wind turbine market.87 Another important factor in the development of the Danish 

wind industry was the consistent domestic market for wind turbines throughout the 1980s and 1990s.88 Taken together, all this 

information suggests the policies pursued by Denmark nurtured the Danish wind industry and created companies with the ability 

to be dominant players in the world turbine market. 

Although this program seems successful for Denmark, replication elsewhere might be difficult. The program was initially 

promulgated in 1990, prior to the formation of the EU. The EU determined that the Danish Wind Turbine Guarantee program 

created unfair competition and the scheme is no longer available within the EU.89

3.3 The Netherlands 

3.3.1 Background 

The Netherlands is a small, low-lying country in northern Europe with a population of 16 million in an area about twice the size 

of New Jersey.90 The Netherlands generated about 96 billion kWh of electricity in 2002, about 88 percent of which came from 

fossil fuel sources, with nuclear accounting for about 4 percent and non-hydro renewables accounting for about 8 percent.91 (See 

81 Office of Technology Assessment, September 1995, Renewing Our Energy Future, OTA-ETI-614, http://www.wws.princeton.edu/cgibin/byteserv.prl/~ota/ns20/year_f.html, accessed April 22, 2004. 82 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Chapter 8. 

83 Auken, Svend, Winter/Spring 2002, “ISSUES AND POLICY: Answers in the Wind: How Denmark Became a World Pioneer in Wind 

Power,” Fletcher Forum on World Affairs, 26(149). 84 Energy Information Administration, http://www.eia.doe.gov. Accessed April 20, 2004. 85 BTM Consult ApS, March 2003, International Wind Energy Development World Market Update 2002 with Forecast 2003-2007, 

Ringkobing, Denmark. 

86 BTM Consult ApS, March 2004 Press Release, International Wind Energy Development World Market Update 2003 with Forecast 2004-

2008, Ringkobing, Denmark, http://www.btm.dk/documents/pressrelease.pdf, accessed April 22, 2004. 87 Moller, Torgny, January 2004, “Danish wind giants head for merger,” Windpower Monthly, 20(1). 88 Gipe, Paul, 1995, Wind Energy Comes of Age, John Wiley & Sons, Inc: New York, P57. 89 Office of Technology Assessment, September 1995, Renewing Our Energy Future, OTA-ETI-614, http://www.wws.princeton.edu/cgibin/byteserv.prl/~ota/ns20/year_f.html, accessed April 22, 2004. 90 Central Intelligence Agency, The World Factbook 2004, “The Netherlands,” 

http://www.cia.gov/cia/publications/factbook/geos/da.html#top, accessed May 3, 2004. 91 International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris. 
Figure 8.) The Netherlands gets a greater percentage of its non-hydro renewable electricity from biomass and waste incineration

than any other country in the EU.

92 Wind accounts for about 24 percent of non-hydro renewable energy, and solar photovoltaics 

for less than one percent. 

The Dutch began encouraging the development of renewable electric generating capacity in the 1970s as a response to the oil 

crises. In the early 1980s, concern over environmental issues such as ozone and local air pollution continued to advance the 

renewables sector. In the late 1980s, the Dutch government became concerned about climate change, particularly important for 

the Netherlands given its low elevation. 

Fossil 

Fuels

88%

Hydro

<1%

Nuclear

4%

Non-Hydro Renewables 

8%

80%

60%

40%

20%

0%

Generation

100%

Figure 8. Dutch Electricity Generation, 2002

 Source: International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris.

Solid Biomass (34%) 

Biogas (8%) 

Waste (33%) 

Wind (24%) 

PV (<1%) 

Research into wind energy began in 1976 with the start of the National Wind Energy Research Program (NWER). A national

solar energy research program began in 1978 with funding for solar thermal energy; funding for solar photovoltaics began in the

1980s. Biomass and waste also figure prominently in the country’s renewable energy mix. The biomass industry benefits from

subsidies to the agricultural sector and from its role in reducing sulfur dioxide (SO2) and CO2 emissions. Also, the country has

significant quantities of wood waste, straw, and verge grass available. Bioenergy research programs began in 1990. These 

included research into co-combustion (co-firing), gasification, pyrolysis, waste-to-energy, landfill gas technology and 

utilization, biogas wastewater treatment, digestion of green waste, bioethanol production and energy crops. 

In 1981, the NWER was superceded by a second wind energy R&D program, which conducted demonstration projects as well

as basic research.93 The focus of both these programs was large-scale wind turbines and wind farms, similar to the early focus of

R&D efforts in the United States and Germany. 

A striking feature of Dutch renewable energy policy has been its use of national planning to guide industry and business. The 

Dutch developed three national plans between 1980 and 1997, and these plans have included energy efficiency standards for 

buildings, increased use of combined heat and power, and accelerated development of renewable energy. The most recent plans 

have also included targets for addressing climate change, and the 1997 Action Programme for Renewable Energy sets targets of

meeting 5 percent and 10 percent of the nation’s total energy demand with renewable sources in 2010 and 2020, respectively.

The use of national plans has provided a context within which industry, business, and government can work to achieve broad 

policy goals.94

3.3.2 Investment Subsidies (1986 and 1991) 

The Netherlands progressed from basic R&D to demonstration projects relatively quickly between the late 1970s and 1981. As 

in the United States and Germany, the early focus of the R&D program in the Netherlands was on large-scale turbine 

technology. The first major programs to support the development of the wind industry were the investment subsidies offered 

under the Integrated Programme for Wind Energy (IPW) begun in 1986 and the Application of Wind Energy in the Netherlands 

- 19 - 

 

92 International Energy Agency, Renewables Information, 2003, OECD: Paris. 93 Wolsink, Maarten, 1996, “Dutch Wind Power Policy: Stagnating Implementation of Renewables,” Energy Policy 24(12): 1079-1088. 94 Moore, Curtis and Jack Ihle, 1999, “Renewable Energy Policy Outside the United States,” Renewable Energy Policy Project,

http://solstice.crest.org/repp_pubs/articles/issuebr14/, accessed May 3, 2004. 
(TWIN) program begun in 1991 (Figure 9). These programs were similar, each offering two kinds of subsidies. The first 

subsidy, covering 35-40 percent of the cost of the turbines is similar to investment subsidies offered in the United States (1980s) 

and Denmark (1979-1989).

95 

The second subsidy, offered for turbines that met stringent noise requirements, was designed to encourage turbine manufacturers

to develop turbines that would be more acceptable to the public. The second subsidy also tried to reduce siting difficulties by

offering incentives to site wind projects in unpopulated areas. Denmark has a different kind of program that is also trying to

reduce public opposition to wind turbines. Denmark’s program subsidizes the investment required to replace old wind turbines 

with newer, more efficient models. Between 1986 and 1990, the installed non-hydro renewable capacity in the Netherlands 

increased sixteen-fold from 3MW to 48MW.

96 Although the United States has invested money in R&D to make wind turbines 

more efficient, the government has not promoted policies that would reduce public opposition to wind turbines in local areas. 

3.3.3 Windplan 

The Netherlands, like the United States, relied on voluntary programs as much as possible. One example of a voluntary program

in the Netherlands was the utilities’ creation of Environmental Action Plans (MAPs), which specified how utilities would reduce 

CO2 emissions in the mid-1990s. One part of the MAPs, Windplan, is similar to the German 100MW wind program begun in

1989. However, while the mandatory program in Germany was successful in installing more than 300 MW of wind capacity, the 

plan in the Netherlands did not even install 100 MW. This is partly due to the voluntary nature of Windplan, but was also related 

to the turbine specifications that Dutch utilities demanded manufacturers meet to participate in Windplan. The specifications

were awkward and difficult to produce, and the turbines themselves were less efficient than other models. This both undermined 

Windplan and reduced the ability of Dutch wind turbine manufacturers to compete in the world market.97

Another barrier to the installation of wind capacity in the Netherlands has been the planning period and the number of permits 

required. Whereas in Denmark and Germany, the national government could persuade local authorities to install windpower, in

the Netherlands the planning and siting processes lie entirely within the purview of municipalities. For their part, the 

municipalities require numerous environmental and building permits and encourage consensus-based decision making, which

Figure 9. The Netherlands' Non-hydro Renewable Energy Policies and Growth, 1980-

2002

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Non-hydro renewable gen.

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

 as a percent of total net generation

Integrated Programme for Wind Energy (IPW)

White Paper on Energy Policy

Goal of 1,000 MW of wind capacity in 2000

TWIN ends

Support Programme for Application of

Wind Energy in the Netherlands (TWIN)

Integrated Program for Wind Energy ends

Ecotax system begins

Green electricity market deregulated

Action Programme for

 Renewable Energy

Energy Investment

 Deduction

Subsidy Regulations Energy Supply in

Non-Profit and Private Sectors (EINP)

 MW = Megawatts

 Sources: Generation, Energy Information Administration, International Energy Annual; Policies, various sources compiled for and 

cited in this article by Office of Coal, Nuclear, Electric and Alternate Fuels, Energy Information Administration.

- 20 - 

 

95 Gipe, Paul, 1995, Wind Energy Comes of Age, John Wiley & Sons, Inc: New York. 96 Energy Information Administration, http://www.eia.doe.gov/pub/international/iealf/table64g.xls, accessed May 3, 2004. 97 Johnson, Anna; and Staffan Jacobsson, “The Emergence of a Growth Industry: A Competitive Analysis of the German, Dutch and Swedish 

Wind Turbine Industries.” Paper presented at the Winter 2002 Danish Research Unit for Industrial Dynamics Conference, Aalborg, Denmark, 

January 17-19, 2002, http://www.druid.dk/conferences/winter2002/gallery/jacobsson.pdf, accessed April 26, 2004. 
- 21 - 

 

increases planning time and often kills projects altogether.98 The multi-layered permitting processes in the United States are 

more similar to those of the Netherlands than those of Denmark and Germany. In the United States, local municipalities have 

zoning control, power producers are regulated by the States and, if a facility is to be located on Federal lands, there are Federal 

permitting issues as well. 

3.3.4 Demand-Pull Ecotax System 

The Netherlands’ more recent ecotax system is unlike policies used in the United States. It pursues a demand-pull approach to 

encouraging consumers to buy renewable energy. In contrast, the United States favors supply-push systems such as R&D 

(Federal) and renewable portfolio standards (numerous States). The Dutch ecotax system, also called the regulatory energy tax, 

has two components. First, producers of green power receive a production subsidy. Additionally, households are exempt from 

the ecotax for all green power purchases. In some areas of the Netherlands, these two incentives combine to make green power 

cheaper than fossil alternatives, while in other areas, fossil-generated power is still more economic.99 

As a response to these measures, the demand for green electricity from small consumers (such as households) has increased 

from a few thousand households in 1998 to about 1 million households in July 2002.100 Demand for renewable energy has 

outstripped supply, however, and the Netherlands has been importing green electricity since 2000.101 In 2001, the Netherlands 

introduced a system of green certificates to authenticate imported renewable electricity. 

3.4 Japan 

3.4.1 Background 

Japan is an island nation of about 127 million people living in a land area slightly smaller than California.102 Japan generated 

1,097 billion kWh of electricity in 2002, of which 71 percent was generated from fossil fuels, 21 percent from nuclear power 

plants, 6 percent from hydropower and 2 percent from non-hydro renewables.103 (See Figure 10.) Waste and biomass dominated 

electricity production from non-hydro renewables, though Japan also got electricity from geothermal, solar, and wind sources as

well. 

As with Germany, Denmark, and the Netherlands, Japan became interested in renewable energy during the energy crises of the 

1970s. In 1973, Japan used oil to supply 76 percent of its energy needs. This dependence had declined to 68 percent by the late1980s.104 Japan’s reaction to the energy crisis was to work towards securing stable oil supplies, promote the development of 

nuclear power and renewable energy sources, and encourage energy conservation.105

In 1997, Japan hosted the Third Conference of the Parties to the United Nations Framework Convention on Climate Change. 

During this meeting, the Conference negotiated the Kyoto Protocol, the implementation mechanism of the Climate Change 

Convention. Japan ratified the Protocol and has agreed to reduce its CO2 emissions to 6 percent less than 1990 levels by 2012. 

While Japan’s initial interest in renewable energy was fueled by energy supply and security concerns, environmental 

considerations, including climate change, have continued to drive policies in recent years. 

98 Reiche, Danyel and Mischa Bechberger, 2004, “Policy Differences in the Promotion of Renewable Energies in the EU Member States,” 

Energy Policy 32:843-849, Junginger, M.; Agterbosch, S.; Faaij, A.; and W., Turkenburg, 2004, “Renewable Electricity in the Netherlands,” 

Energy Policy 32:1053-1073. 99 Ibid.

100 Junginger, M.; Agterbosch, S.; Faaij, A.; and Turkenburg W., 2004, “Renewable Electricity in the Netherlands,” Energy Policy 32:1053-

1073. 

101 Reijnders, L., 2002, “Imports as a major complication: liberalization of the green electricity market in the Netherlands,” Energy Policy

30:723-726. 

102 Central Intelligence Agency, The World Factbook 2004, “Japan,” http://www.cia.gov/cia/publications/factbook/geos/ja.html#top, accessed 

June 9, 2004. 

103 International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris. 104 Kamata, Yoshiro, August/September 1989, “The Energy Situation and Energy Policy in Japan,” Revue de L’energie, 40: 692-702. 105 Ibid.
Biogas (23%)

 Source: International Energy Agency, Energy Statistics of OECD Countries, 2001-2002, OECD/IEA, 2004, Paris.

Figure 10. Japanese Electricity Generation, 2002 

Industrial Waste (<1%) 

Non-Hydro Renewables

2%

6%

Nuclear

21%

Hydro

Fossil Fuels

71%

Geotherma

PV (<1%)

l (11%) Wind (1%)

Municipal Waste (11%) 

Solid Biomass (52%)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Non-hydro renewable gen.

as a percent of total net generation

0

100

200

300

400

500

600

700

Cummulative PV Capacity .

 PV = Photovoltaics

 MW = Megawatts

 R&D = Research and Development

 RPS = Renewable Portfolio Standard

 Sources: Generation, Energy Information Administration, International Energy Annual; Policies, various sources compiled for and 

cited in this article by Office of Coal, Nuclear, Electric and Alternative Fuels, Energy Information Administration. Installed PV Capacity,

International Energy Annual, IEA PV Technology Status and Prospects Annual Report 2002, Paris, France.

Figure 11. Japan's Non-hydro Renewable Energy Policies & Growth, 1974-2002,

with Installed PV Capacity 1992-2002

New Sunshine Program Sunshine Project

Moonlight

Project

70,000 Solar Roofs Program

Net metering guidelines

for PV systems

Wind R&D Begins under 

Sunshine Project

Windpower Goal:

20 MW in 2000;

600 MW in 2010

Solar power goal: 400 MW by 2000; 4,600 MW by 2010

PV Investment

subsidies Cumulative 

PV Capacity

RPS

Law Concerning the Promotion

of Development and 

Introduction of Petroleum

Substituting Energy

- 22 - 
- 23 - 

 

3.4.2 Policies 

Japan’s support of renewable energy began in 1974 with the Sunshine Project (Figure 11), a program meant to develop 

alternative energy resources (including solar, geothermal, coal gasification/liquefaction, and hydrogen) through R&D efforts.106

Solar energy efforts focused initially on solar thermal applications rather than photovoltaics, but after 1980, Japan began to fund 

more R&D for PV.107 The Moonlight Project, targeting R&D for technologies promoting energy efficiency began in 1978. 

Together these two projects oversaw R&D programs that did basic and applied research undertaken cooperatively by 

government, industry, and academia.108

In 1980, Japan passed the Law Concerning the Promotion of Development and Introduction of Petroleum Substituting Energy, 

which charged the government with adopting guidelines for the use of alternative energy sources and technologies and fiscal 

measures to encourage their development.109 The law also created the New Energy Industrial Technology Development 

Organization (NEDO) which was established to promote the development of new, non-petroleum sources of energy.110

In 1981, NEDO began conducting wind R&D under the auspices of the Sunshine Project. Between 1981 and 1986, the R&D 

program successfully developed a 100 kW pilot wind plant and conducted research on materials, reliability, control properties, 

power generation, and the potential impacts of wind-generated electricity on power grids. In 1986, the focus of R&D shifted to 

larger, MW-sized machines. The 1990s were characterized by a series of demonstration projects and further research, 

particularly into interconnection and grid stability issues.111 In the mid-1990s, the Ministry of International Trade and Industry 

(MITI) articulated a goal of 20 MW of installed wind capacity by 2000, and 600 MW by 2010.112 By the end of 2003, 

windpower capacity in Japan was just over 500 MW.113

In 1992, the government introduced the New Sunshine Program to further support alternative sources of electricity. This 

program combined the R&D efforts of the Moonlight Project and the original Sunshine project together into one program. To 

encourage the development of grid-connected, distributed generation, the government passed laws in 1992 and 1993 that 

established the basic rules of net metering, setting the buy-back price of electricity equal to the retail selling price of 

electricity.114

In May 2002, Japan instituted an RPS, the “Law on Special Measures for the Utilization of New Energy, etc.” This law, passed 

to ensure energy security and curb global warming, promotes the use of solar, wind, biomass, geothermal, and small hydro (less 

than 1,000 kW). This measure allows power companies to meet their obligations by producing power from new generation 

sources, purchasing allowable generation from others, or, trading with other power companies via a renewable energy certificate

trading system. Eight-year goals are to be re-evaluated and set every 4 years. 115

Photovoltaic 

Japan’s success throughout the 1990s in encouraging the development of a market for photovoltaic technology is remarkable. In 

1992, the country had an installed PV capacity of less than 19 MW. By the end of 2002, installed capacity increased to 635 

MW.116 The growth in PV was driven by four actions on the part of the Japanese government, all taken between 1992 and 1994. 

First, the government provided net metering guidelines to dictate how distributed PV generation would be hooked up to the 

national electricity grid. Second, the government set an ambitious goal for the development of 4,600 MW of PV by 2010. Third, 

the government introduced subsidies to support the installation of PV technology. Finally, the government established the 

70,000 Solar Roofs Program to encourage residential use of PV and to inform people about the benefits of using PV technology. 

The government subsidies for PV began in 1994, with a program called the Residential Monitoring Photovoltaic Power 

Generating Systems, which provided subsidies for installation of PV systems if the installer collected data about user needs and 

106 Kurokawa, Kosuke, 1996, “An Overview of System Technology in Japan,” Renewable Energy, 8:480-484. 107 Watanabe, Chihiro, 1995, “Identification of the Role of Renewable Energy: A View from Japan’s Challenge: The New Sunshine Program,” 

Renewable Energy, 6:237-274. 108 Tatsuta, M., 1996, “New Sunrise Project and New Trend of PV R&D Program in Japan,” Renewable Energy, 8:40-43. 109 Fukasaku, Yukiko, 1995, “Energy and Environment Policy Integration: The Case of Energy Conservation Policies and Technologies in 

Japan,” Energy Policy, 23(12):1063-1076. 110 Kamata, Yoshiro, August/September 1989, “The Energy Situation and Energy Policy in Japan,” Revue de L’energie, 40: 692-702. 111 Ushiyama, Izumi, 1999, “Wind Energy Activities in Japan,” Renewable Energy, 16:811-816. 112 Ushiyama, Izumi, 1999, “Renewable Energy Strategy in Japan,” Renewable Energy, 16:1174-1179. 113 International Energy Agency, 2003, IEA Wind 2002 Annual Report, Chapter 12: Japan. 114 Kurokawa, Kosuke, 1996, “An Overview of System Technology in Japan,” Renewable Energy, 8:480-484, International Energy Agency, 

2003, IEA Photovoltaic Power Systems Programme Annual Report, “Japan: PV technology status and prospects,” http://www.ojaservices.nl/iea-pvps/ar02/index.htm. 115 “Development Trends in and Promotional Measures for Renewable Energy, Part 1,” (Draft Translation) The Institute of Energy Economics, 

Japan, Summer 2004 

116 International Energy Agency, 2003, IEA Photovoltaic Power Systems Programme Annual Report, “Japan: PV technology status and 

prospects,” http://www.oja-services.nl/iea-pvps/ar02/index.htm, accessed May 27, 2004. 
- 24 - 

 

efficiency.117 This program was renewed in 1997 and renamed the Residential PV System Dissemination Programme. The goal 

of both these programs was to reduce the cost of installing PV systems by subsidizing the installation costs of residential 

systems.118 The subsidies were available for homeowners installing their own PV systems, for suppliers of ready-built houses, 

and for public organizations to introduce systems into public buildings.119 Finally, there was also a subsidy for connecting PV 

systems to low voltage lines on the power grid. Over the course of the program, the subsidies decreased as the economics of PV 

systems became more favorable. Between 1994 and 2000, PV systems were installed in more than 50,000 houses.120

The net metering guidelines in Japan are similar to those in California and many other states. However, while Japan chooses to 

subsidize grid connection for PV systems, California’s net metering laws make connection the responsibility of the utilities. 

Both California and Japan offer subsidies for the initial investment/installation costs of PV systems, a factor which has made the 

systems more economically favorable. 

117 Kuwano, Yukinori, 1998, “Progress of Photovoltaic System for Houses and Buildings in Japan,” Renewable Energy, 15:535-540. 118 International Energy Agency, 2003, IEA Photovoltaic Power Systems Programme Annual Report, “Japan: PV technology status and 

prospects,” http://www.oja-services.nl/iea-pvps/ar02/index.htm, accessed May 27, 2004. 119 Ibid. 120 Ibid.
3.5 Comparison of Policies to Promote Non-hydro Renewable Energy

Table 2 provides a summary comparison of the non-hydro renewable energy policies and incentives discussed in this chapter to similar polici

discussed in Chapter 2. 

Table 2. Summary Comparison of Countries’ Non-hydro Renewable Energy Policies and Incentives

Country Provisions United States Analogy 

GermanyResearch and Development (1974-Present)

Early R&D conducted by firms in the aerospace industry and was

focused on large turbines (larger than 1MW), which wereperceived as having the best chance of becoming marketable.

R&D program also initially contracted with companies from the aerospace industry and focused on large-scale turbine technology

GermanyElectricity Feed-In Law(1991) & Renewable EnergyLaw (2000)

• Obligated utilities to buy power from renewables producers • Purchase price for power was 90% of the retail rate 

PURPA 

• Required utilities to buy power from renewables producers • Purchase price for power was at utilities “avoided cost,” which 

was defined by the states 

• German 

high

• German

Califproje

DenmarkInvestment Subsidy (1979-1989)

• 30% capital grant to individuals who installed wind turbines,

solar panels or biogas digesters 

• Wind turbines designs had to be approved by Riso Test Station

to be eligible 

1978 Energy Tax Act

• 10% tax credit for business investments in wind, solar,

geothermal, and ocean thermal 

• Extended to 1985 and then again to 1988

• Denma

State

• No app

receiProg

DenmarkProduction Subsidy & othersupport mechanisms (1981 &1992)

• Production subsidy offsets energy tax (later CO2 tax) for 

wind energy producers 

• Additional production incentive for private renewable energy

producers 

• Law obligated utilities to buy power from renewables 

producers 

• Law set utilities’ purchase price for power at 85% of the retail

rate 

PURPA 

• Required utilities to buy power from renewables producers • Purchase price for power was at utilities “avoided cost,” which 

was defined by the states 

PTC (from 1992 EPACT)

• Production incentive for private energy producers • Must be renewed periodically by Congress 

• Danish 

highprod

• The 

the U

• Den

Unit

• Den

perio

DenmarkDomestic Market Support (1990)

• Government-guaranteed long term financing of large wind 

projects that used Danish-made turbines 

• Program designed to protect/help the Danish wind industry NONE 

NetherlandsIPW (1986) & TWIN (1991)

• Investment subsidies for wind energy covering 35-40% of 

capital costs 

• Additional subsidies for turbines with low noise ratings or

those located in remote areas (to reduce public opposition) 

1978 Energy Tax Act

• 10% tax credit for business investments in wind, solar,

geothermal, and ocean thermal 

• Extended to 1985 and again to 1988 

• The Du

State

• No Uni

subs

NetherlandsVoluntary Programs (utilities)

• Joint agreement between utilities to install 250 MW of 

wind (unsuccessful in actually installing wind capacity).

• PVUSA (PV for Utility Scale Applications) (1986) TEAM-UP 

(1994)

• PVUSA 

the sha

NetherlandsDemand-pull Ecotax system(2000)

• Exempt renewable energy from ecotax to encourage 

consumers to choose green power

 (has resulted in need to import green electricity to meet market demand).

• California’s 1999 customer credit (rebate) for purchases of 

renewable electricity.

• Califor

Netherla

Japan Net metering 

• Sets parameters for connecting small, distributed PV and wind 

systems to the grid

• Similar to policies enacted in 32 States and the District of 

Columbia 

Japan 70,000 Solar Roofs with investment subsidies (1994)RPS (2002)

• Encourage the use of PV systems in residences 

• Educate consumers about PV technology

• 1.35% of total electricity to be generated by renewables by

2010 

Million Solar Roofs Initiative (1997) 

• Seeks to install a million solar PV or solar thermals systems 

by 2010 

• No financing offered at Federal level 

• RPS Laws enacted in various states • No Fed

 Source: Various sources compiled for and cited in this article by Office of Coal, Nuclear, Electric and Alternate Fuels, Energy Information Administration. 

- 25 - 
- 26 - 

 

4. Conclusion 

In general, policies to promote non-hydro renewable energy in Germany, Denmark, and Japan have tended to be coordinated 

and consistent. In the United States, many policies are enacted at the State level and may not be synchronized with Federal 

policies, which themselves are subject to periodic reauthorization and/or appropriations legislation. In addition, both the 

Netherlands and the United States have complex multi-layered permitting processes that can slow the development of new 

renewable energy facilities. 

Although the United States enacted laws similar to successful legislation in other countries, Denmark and Germany have both 

increased the market penetration of non-hydro renewables to an extent not yet seen in the United States. Some of the differences 

in outcomes for the installation of non-hydro renewable energy are related to varying resource endowments, political and 

economic systems, cultural traditions, and electricity prices, but three other factors may also be important. At a general level, 

Denmark and Germany both displayed an extraordinary level of political commitment to renewable energy that was both 

consistent and well funded. Additionally, Denmark’s use of cooperative ownership structures helped overcome some public and 

political opposition to wind turbine technology. Finally, Denmark, Japan, and Germany enacted policies expressly for the 

purpose of promoting renewable energy—something the United States did not do until 1992 with the passage of EPACT. The 

following discussion will examine each of these points in detail. 

4.1 Political Commitment 

One outward manifestation of the political commitment displayed in Denmark was the setting of ambitious goals for renewable 

energy—but, more importantly, the government enacted policies to enable industry to meet the goals. For instance, Denmark’s 

first renewable energy goal, set in 1981 when the government began subsidizing production from wind turbines, called for the 

production of 1.3 billion kWh of electricity from renewables by 1995, a goal that was met by 1993. In 1990, the Danish 

government again set a renewable energy goal, this time of installing 1,500 MW of capacity by 2005, a goal met in 1998.121 The 

1990 goal, articulated in the Danish Energy Plan 2000, was supported by generation subsidies, CO2-related subsidies, and 

guaranteed pricing policies introduced in Denmark in 1992. The structure of these subsidies further confirms Denmark’s 

commitment to renewable energy as the subsidies are guaranteed over the long-term and do not need to be regularly reviewed by 

the government. Finally, in its Energy 21 policy unveiled in 1996, Denmark set a goal of 5,500 MW of renewable capacity by 

2030122 and had achieved more than 3,100 MW by the end of 2003. The consistency with which Denmark has met its goals 

ahead of schedule gave confidence to wind industry developers and financiers that the government was committed to 

encouraging the development of renewable energy. 

Germany set few goals expressly for developing renewable energy but did begin setting CO2-related goals in 1990 and generally 

articulated a commitment to renewable energy as a way of reaching CO2 reduction targets. This text from a Cabinet Decision on 

November 7, 1990 illustrates this commitment: “The Federal Government reaffirms its call for the longer-term economic 

potential of renewable energy sources to be tapped as rapidly as possible in light of the contribution they could make to CO2

reduction...the Federal Government will continue to work towards making it easier for renewable energy sources to gain a 

foothold in the market.”123 Germany followed up this CO2 goal with the 1991 Feed-In Law, which was successful in 

significantly increasing the installed renewable capacity in Germany. 

In contrast to Denmark, the Netherlands set a number of goals related to renewable energy and enacted policies to assist in 

promoting renewable energy, but still consistently failed to meet their targets. In 1985, the Netherlands set a goal of installing 

1,000 MW of windpower by 2000, a target that was reiterated in 1991 when the TWIN program was enacted. The Netherlands 

had not yet met this goal at year-end 2003. Although the Netherlands had investment subsidy programs to support their goals, 

few projects got built, possibly because of the complex permitting system in the Netherlands.124 Additionally, the utility-run 

Windplan program in the mid-1990s was enacted without government regulation. Had the plan been mandatory rather than 

voluntary, it might have encouraged the installation of more wind capacity. Finally, while incentives in the Netherlands may 

121 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 6. Also, International Energy Agency, 2003, IEA Wind 2002 Annual Report, Chapter 6: Denmark. 122 Sawin, Janet, “The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Windpower in the United 

States, California, Denmark and Germany, 1970-2000,” PhD Dissertation, Fletcher School of Law and Diplomacy, Tufts University, 

September 2001, Appendix 6. 

123 Ibid. Appendix 7, as cited in Deutsche Bundesministerium fur Umwelt, Naturschutz und Reaktorsicherheit (BMU, German Federal 

Ministry for the Environment, Nature Conservation, and Nuclear Safety), Environmental Policy: The Federal Government’s Decision of 29 

September 1994 on Reducing Emissions of CO2, and Emissions of other Greenhouse Gases, in the Federal Republic of Germany, Bonn: 

BMU, November 1994. 

124 Gipe, Paul, 1995, Wind Energy Comes of Age, John Wiley & Sons, Inc: New York. 
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make renewables look like profitable investments, regulations in the Netherlands can change very quickly and without periods 

of adjustment for business and industry, a factor that serves to make investors more wary of risking capital.125 

Japan’s political commitment to renewables and to PV, in particular, has been strong and consistent over time. R&D into “new 

energy” sources began in the late-1970s and continues to this day. In the early 1990s when the government’s focus switched 

from strict R&D to market support mechanisms, the government both set ambitious goals for the development of solar power 

and enacted policies to support the goals. 

Overall, based on these three examples, the country that displayed the most success in meeting its goals, Denmark, gets a high 

percentage of its electricity from renewable sources, and Germany, a country that has displayed its political commitment in 

other ways, has the highest installed wind capacity in the world. Japan’s success at installing PV capacity in the 1990s is also 

likely related to the government’s political commitment to both R&D and market support mechanisms. The Netherlands also 

gets a high percentage of its electricity from renewable sources, but its ability to achieve its windpower goals may have been 

hampered by political and regulatory inconsistency. 

4.2 Public Opposition 

Although many people support the idea of renewable technologies, having large renewable energy projects installed nearby can 

still generate significant local opposition. Some types of projects will naturally cause more opposition than others. For example, 

there is little organized public opposition to small-scale PV systems for residences and/or commercial establishments. In fact,

even larger-sized PV systems are frequently not targets for protests because many such structures are erected as buildingintegrated photovoltaic systems (BIPV), which make the structures more aesthetically pleasing. 

For other renewable technologies, however, public opposition can hamper the development of projects. The design of such 

projects can often influence the level of public support the project can garner. For instance, with wind projects, public opinion 

studies have shown that smaller numbers of turbines are more acceptable than hundreds or thousands of turbines.126 In addition 

to aesthetics, there is some opposition to wind projects because of noise concerns and birds killed by the turbine blades. 

Countries have dealt with the issue of public opposition in very different ways. In Denmark, the use of cooperatives to involve

ordinary citizens in the development of windpower created a voting constituency invested in the technology that helped propel 

the government towards wind- and renewable-friendly policies. Additionally, more than any other country discussed, Denmark 

created and protected an internationally competitive wind industry that now provides thousands of jobs to Danish people—

another constituency invested in windpower. Finally, Denmark’s national government required local communities to include 

potential sites for wind turbines in their local plans, a move which helped to put the issue on the table for many communities,

ultimately simplifying siting issues. 

In the United States, some projects have run into significant opposition, while others have moved forward easily. However, 

there are no major regulations, such as those in Denmark, which simplify the permitting process for wind turbines. Local 

municipalities have control over siting and permitting of new construction, while States regulate power producers. The situation 

is similar in the Netherlands, where a complex permitting process can delay or even prevent the installation of wind capacity. 

4.3 Structure of Policies 

A final distinction between policies enacted in Denmark, the Netherlands, Germany, Japan, and the United States has been the 

structure of the policies. The manner in which each country views renewable energy affects the way its policies are structured.

The EU and Japan treat renewable energy as a strategic interest, creating numerous inter-related policies designed specifically to 

encourage the development of renewables. In Denmark and Germany, the stated purpose of the Feed-In-type laws enacted to 

support the development of wind power was to encourage the growth of renewable energy. PURPA, the U.S. counterpart to 

these policies, was less narrowly focused on renewables, as its original stated purpose was to encourage energy conservation and 

efficiency in the electric utilities sector.127 

A second element to a policy’s structure is its method of implementation. Until the late-1990s, the Netherlands used mostly 

voluntary programs, while Germany and Denmark dictated the price that utilities were required to pay for renewable energy. 

Germany and Denmark also used a variety of financial incentives in addition to this command-and-control approach. The United 

States also turned to financial incentives with the PTC and REPI in 1992. Since 2000, Germany, Denmark, and the Netherlands 

have all been moving towards a more market-based system with both the Netherlands and Denmark beginning the use of green 

certificate trading in electricity markets. The method of implementation is crucial for how policy is enacted—voluntary 

programs, which cannot be enforced, are more difficult to implement, but some command-and-control methods impose high 

costs on utilities or consumers that hamper market development. 

125 Reiche, Danyel and Mischa Bechberger, 2004, “Policy Differences in the Promotion of Renewable Energies in the EU Member States,” 

Energy Policy 32:843-849. 126 Gipe, Paul, 1995, Wind Energy Comes of Age, John Wiley and Sons, Inc.: New York. 127 U.S. Government Printing Office. Compilation of Selected Energy-Related Legislation: Electricity. Washington, DC, 1991. Page 115. 
- 28 - 

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