The Response of Market and Policy Design to Increasing Shares of Renewables in California and Germany: Lessons Learned and Directions for the Path Ahead
The experiences in Germany and California offer important lessons for other jurisdictions. We consider whether the apparent convergence of policy and market design in Germany and California will reveal any general best-practice pathways.
Germany and California stand out as two of the world’s leading jurisdictions in transforming their electricity systems to accommodate the integration of high shares of renewables.
In both jurisdictions, more than 30 percent of electricity consumption is drawn from generation with nonhydroelectric renewable resources (FIGURE ES-1). In Germany, renewable production even surpassed production from coal for the first time in 2018. Notably, this was accompanied by considerable changes in the retail rate components. Regarding the way ahead, both jurisdictions have ambitious targets. Germany has set a target for renewables of 80 percent of power consumption by 2050 intended to be the backbone of the energy transition to the “age of renewables,” (Energiewende); California has a target of 60 percent renewables by 2030, and 100 percent clean energy by 2045—potentially allowing for a role for other technologies to achieve net-zero carbon emissions. These changes frame another transformation in the expected electrification of transportation and potentially heating and cooling in buildings and industry, possibly leading to substantial growth in electricity consumption.
The experiences in Germany and California offer important lessons for other jurisdictions. We consider whether the apparent convergence of policy and market design in Germany and California will reveal any general best-practice pathways. Alternatively, divergent pathways might suggest that best practice will differ among jurisdictions because of different regulatory traditions and other reasons, or that consensus around best practice has yet to emerge.
The objectives of the report are threefold:
- To provide general background and a history of climate and electricity policy in Germany and California, describing important characteristics of their electricity systems, including regulation and market design, actors, and resources.
- To investigate how markets and policies have evolved and improved, and how those trends have been affected by efforts to promote and accommodate increasing shares of renewables.
- To identify options for the way forward to achieve greater integration of renewables and identify future inflection points where changes in regulatory policies or market design might become essential to achieve this outcome.
To read more, please download the report.
Dallas Burtraw is a Darius Gaskins senior fellow at RFF. Burtraw’s research includes analysis of the distributional and regional consequences of climate policy and the evolution of electricity markets including renewable integration.
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