Muhlhausen, Germany -- A solar-power project built by a Berkeley company may point Germany toward a pollution-free future.

Set in the heart of Bavarian farmland, the 30-acre facility went online earlier this month, becoming the biggest solar energy plant in the world.

For the government of Chancellor Gerhard Schroeder, the Muhlhausen solar farm represents a gamble that Germany, the world's third biggest economy, can replace its principal energy sources -- coal, natural gas, oil and nuclear power -- with clean, safe and renewable alternatives.

"There's a huge amount of opportunity here in Germany because the government has created a system that encourages large installations," said Thomas Dinwoodie, chief executive officer of PowerLight Corp. of Berkeley, which built and operates the Muhlhausen facility and two other solar parks nearby.

Germany's approach is being closely watched by officials in California and elsewhere as a possible model for developing renewable energy.

PowerLight's three Bavarian solar parks, consisting of 57,600 silicon-and- aluminum panels, will generate 10 megawatts of electricity -- enough to power 9,000 German homes. The amount of electricity produced is much less than power plants fueled by coal or natural gas, but with very low operating costs, the solar project is expected quickly to turn a profit while emitting zero pollution. Schroeder's left-of-center Social Democrat-Green coalition has turned Germany into the world leader in renewable energy since it took office in 1998. Billions of dollars have been spent on wind and solar projects, and Schroeder, in a politically risky move, has sharply increased taxes on petroleum products in an attempt to reduce consumption of conventional fuels.

The campaign accelerated a year ago when Germany enacted a law forcing electric utility companies -- and, ultimately, all electricity users -- to pay higher rates to businesses or individuals who generate solar or wind energy and feed it back into the grid. With this guarantee of revenue, solar panels have become commonplace on new German houses and huge new windmills are a typical sight in rural areas, especially in the more windy north.

"This is part of our commitment as a government, to make Germany the world leader in alternative energy and in taking action against global warming, " said Juergen Trittin, Germany's environment minister. "We are willing to do what is necessary."

The country is now the No. 1 world producer of wind energy, with more than 16,000 windmills generating 39 percent of the world total, and it is fast closing in on Japan for the lead in solar power. Wind and solar energy together provide more than 10 percent of the nation's electricity, a rate that is expected to double by 2020.

It has become a profitable business, too, with about 60,000 people employed in the design and manufacture of wind and solar energy equipment.

Energy analysts and industry executives alike say that California, which leads other U.S. states in renewable energy development, is looking to Germany as a laboratory of what works and what doesn't. Yet even Germany's chief booster of renewable energy warns that the lessons are mixed.

"This has a political cost," said Trittin, who cheerfully admitted in an interview that he is "probably one of the less popular" politicians in the country.

According to recent public opinion polls, close to 80 percent of Germans support the government's strategy of promoting renewable energy sources and its staunch advocacy of the Kyoto Protocol's obligations to reduce emissions of greenhouse gases.

Public support is markedly less, however, for the other key element of the government's anti-oil program. Under a separate law enacted in 1999, gasoline taxes are increasing by 3 euro cents per liter per year -- about 15 U.S. cents per gallon -- provoking howls from commuters and truckers.

"The German people broadly support alternative energy, but Trittin has pushed the limits of that support," said Michael Kohlhaas, an energy policy analyst at the German Institute for Economic Research in Berlin. Increasing numbers of Germans are even finding the ever-present windmills an eyesore.

"Opposition to wind farms is growing fast, but none of the major political parties are prepared to listen to voters' concerns," said Hans- Joachim Mengel, a political science professor at Berlin Free University. "They are ideologically committed to wind as a source of alternative energy and don't want it questioned."

In September, Mengel ran a quixotic independent campaign for state assembly in Brandenburg, on the Berlin outskirts. Running on an anti-wind platform, he beat all expectations by winning 19 percent of the vote.

"A few people make money from (wind power), but everybody else gets nothing," he said. "Why should I sacrifice my landscape so that Herr Mueller down the road can make money by leasing out his land for a wind park?"

Germany's use of alternative energy puts it far in front of environmentally conscious California, where Gov. Arnold Schwarzenegger has been a vocal proponent of renewable fuel sources. On Dec. 13, California officials set a goal of 1 million buildings in California powered by solar energy by 2018, including half of all new homes. They did not offer details of how the target will be achieved, though officials said they are considering a charge on electricity bills to pay for up to $1 billion for investment credits to solar manufacturers and for an extension of existing income and property tax credits to homeowners who install solar panels.

Increasing numbers of U.S. businesses have joined environmental groups to push President Bush to embrace alternative energy. Instead, the administration has blocked attempts in Congress to adopt specific goals and timelines for increasing renewable sources and has emphasized oil, natural gas and coal exploration.

"Germany's policy is a more mixed and balanced strategy than to look under the sands of the Arabian peninsula," Trittin said, referring to U.S. reliance on Persian Gulf oil. "This is more the European way. There are 6 billion people on this globe. You will not solve our need for energy with fossil fuels or nuclear plants. You will do it by substituting with renewables. "

But Germany's experience suggests that the profit motive is the key -- alternative energy sectors grow fastest when users are able to make money on the energy they generate.

A law that has been in effect for a year stipulates that the nation's electric utility companies must buy all wind and solar power generated by residential, commercial and industrial users at a price 10 times higher than the rate that users are charged for the electricity provided by the utilities from coal, nuclear or natural gas plants.

Enticed by the guarantee of selling electricity at 46 euro cents (about 62 U.S. cents) per kilowatt hour for the next 20 years, as stipulated by the new rule, Berkeley's PowerLight Corp. needed no further prompting. CEO Dinwoodie went to a large investment bank in Frankfurt, Deutsche Structured Finance, and got a $65 million investment.

"The financers don't care about solar per se, and that's why this system works here," said Dinwoodie. "This is conventional financing, this is the market itself working. There is no government spending." Dinwoodie is so bullish on Germany that he opened an office in the small city of Regensburg, near the Muhlhausen project, and his wife and two children moved from Berkeley in August to live with him there. He now is busy lining up new solar investment projects around the country.

Under California utility regulations, by contrast, users are only able to draw their bills down to zero, with no profit possible. As a result, solar installations are small and large commercial facilities like PowerLight's Muhlhausen farm are impossible.

"California at one time led the world in renewable energy development, but we gave up that role two decades ago," said Paul Gipe, a wind policy expert from Kern County. Gipe is currently in Canada as acting executive director of the Ontario Sustainable Energy Association, working with the provincial government to enact a German-style system of preferential pricing for renewable energy.

"Germany has picked up that banner and is running with it," Gipe said. "Germany now has the manufacturing jobs that California once had. If we want these manufacturing jobs, then we'd better look at what the Germans are doing, and the simplest thing to do is simply translate the German policy into English and put it into effect."

Other analysts are more cautious.

Mark Levine, director of the Environmental Energy Technologies Division at Lawrence Berkeley National Laboratory, said that California has gone further than Europe in making its factories and commercial buildings more energy-efficient, yet Germany leads the state by far in wind and solar. "Germany's policies are not going to be a direct model for California because our political situations are so different," he said. "But Europe has taken major steps recently, and Germany most of all, largely because of its commitment under Kyoto. People are watching carefully."