As Mattias says, electricity feed laws (also called advanced renewable tariffs) have made an enormous difference in Germany and elsewhere in Europe. Feed laws allow renewables to compete by offering a 20 year supply contract, with term varying depending on the type of renewable generation. The price is set politically, but the quantity is up to the market. More is paid for expensive technology such as solar and less for technologies cheaper to implement, in order to level the playing field and bring complementary technologies online simultaneously and quickly. Doing so is recognized as a public good that the market cannot be expected to provide.

This is the reverse of the approach in Britain and Ontario, for instance, where renewables are encouraged through a formal bidding process for a set amount of capacity. The quantity is politically (and arbitrarily) determined and the price emerges through competitive bidding. Cheaper technologies would dominate and others may not be exploited at all.

The problems with the latter approach are significant. A cumbersome and bureaucratic bidding process restricts participation to the larger players with deep pockets. Those players can only participate if they have access to the highest quality renewable resources as these are the only projects which will be able to compete on price. The mindset behind this approach is one which attempts to force renewable energy into a form compatible with a traditional power system - large-scale generation at a distance from demand.

Unfortunately, this is model is not a good fit with the potential contribution of renewable energy, which is naturally small-scale and distributed. A competitive bidding process tends to set a ceiling on the penetration of renewable energy technology rather than a floor beneath it. The emphasis on low price is counterproductive - the problem is that power prices are too low for alternatives to be viable. Even winning bids often do not lead to construction of new projects as commercial financing can be difficult to find when spot-market prices are very volatile, there is no long-term visibility and a history of political interference makes potential backers nervous. Ontario has begun to recognize this and is planning to introduce feed laws as Standard Offer Contracts shortly.

Feed laws give investors the long-term visibility they are looking for. They are simple enough that the cost of entry is not prohibitive. They encourage small-scale distributed projects by paying enough to make it cost effective to build renewable capacity, even where the renewable resource available to be exploited is not ideal (Bavarian sunshine for instance).

Germany, and others, have made a political decision to use what renewable potential they possess to best effect, even if it is nowhere near competitive on cost grounds with traditional alternatives. This is a recognition of the fact that the traditional model is faltering, partly as a result of looming fossil fuel shortages. Continental Europe is taking the long-term view and planning for the future in advance of a crisis, unlike most of the anglo-saxon world where a short-term market-based view is thoroughly entrenched. Unfortunately, by the time market prices adjust sufficiently for price signals to drive renewable energy, we will probably be pitched into a state of short-term crisis managment which is incompatible with a rational programme of infrastructure replacement. We need to take action while we still have the luxury of taking the long-term view if we choose.