Germany’s solar market has been red hot. So hot, in fact, installations of PV panels in 2011 totaled a record 7.4 GW out of 28 GW installed worldwide according to Bloomberg New Energy Finance. Worldwide solar installations rose 50% in 2011 on falling PV prices caused by overproduction for exports in China. But that red hot solar market is burning the sustainability out of Germany’s global solar market leadership.
But instead of celebrating its 7.4GW achievement there is wailing and gnashing of teeth in Berlin since the feed in tariff subsidized goal for solar installations in 2011 was only 3GW and the government is on the hook for subsidy payments for the excess. Solar subsidies in Germany totaled more than €8 billion ($10.2 billion) in 2011, but produced only 3% of total power produced. Those 2011 solar installations alone will cost electricity customers an additional €18 billion in subsidy costs over the next 20 years according to Rhine-Westphalia Institute for Economic Research (RWI), and industry research group which estimated that total German subsidies for solar energy now total more than €100 billion.
This must stop! Germany’s solar bill is like a parent getting his teenager’s spiking mobile phone bill 250% higher than expected because the kid’s phone habit is insatiable, the meter is running, and Dad is paying the bill.
Germany’s Economy Ministry joined the angry parent club proposing an absolute 1 GW cap on subsidies for installations in a replay of Spain’s ruthless but effective cap on solar subsidies that saw Spain reduced from world PV market leader in 2008 to 8th position in 2011. Now Germany is debating the same tough love medicine despite industry complaints that such action will ruin the German solar market.
But for politicians forced to deal with this subsidy surprise over and over it gets worse. German utility customers now pay a green energy surcharge on electricity bills of 3.59 cents per kilowatt hour of electricity. The German government had promised to limit the surcharge to 3.5 cents but was unable to keep that promise. Now because of the excess solar installations that green energy surcharge is also surging to 4.7 cents per kilowatt hour or about €200 more per year on a typical household energy bill in addition to the any other rate increases for actual costs approved by regulators. In a volatile and weak EU economy spiking utility bills are not what politicians or voters want to face.
FiT in a Falling Price Market
Above market local feed in tariff subsidies in a falling global PV price market is forcing Germany to fundamentally rethink its support for renewable energy. The man responsible for paying Germany’s solar bill for these subsidies, Environment Minister Norbert Roettgen sounded like an irate parent when he got that bill. He said the German government would begin reducing FiT subsidies monthly instead of twice yearly as in the past to “curb an unacceptable surge in installations” from feed-in tariffs providing subsidies at above- market prices for solar power.
The solar industry learned to game the twice year FiT subsidy review process in Germany so they often times projects to come on line to qualify for the higher FiT subsidy at the last minute. For example, installations in December 2011 totaled 3 GW–the entire annual target—in order to qualify for the higher FiT subsidy before the rate dropped in January. So much solar was installed that it will take a mere 225MW of additional installations in the first quarter of 2012 to trigger another 15% reduction in the Fit in July 2012 under the old rules. Minister Roettgen hopes cutting the FiT allowance monthly will stop that gaming, but in case it does not do so—he said all solar subsidies would end in 2017.
Well, that cold turkey announcement sent solar share prices plunging in global markets. Germany has been the hope and prayer for many solar companies seeking to avoid disaster from falling PV prices. Meyer Burger, Europe’s biggest maker of solar-panels, fell 6.6%. SMA, Germany’s biggest solar company, fell 5.3%. SolarWorld, the big German PV panel maker, fell 6.5%.
The lesson is feed in tariffs are a good way to jump start a new technology but they create dependencies and manipulate market behavior in ways that often have unintended consequences for all. In Spain, Italy and other EU countries these subsidies created unsustainable ‘bubble’ markets that China was able to easily exploit to suction up subsidy money through falling prices for its export panels that undermined domestic producers, took global market share and used the proceeds to pay for its own domestic production capacity.
This is not the outcome anyone imagined—but it is the reality all must now face.
- So Long Solon Solar (insightadvisor.wordpress.com)
- Solar Energy Worry List (insightadvisor.wordpress.com)
- Germany Installed More Than 2 GW of Solar in December (greentechmedia.com)
- Solar Is Bailed Out Once Again (fool.com)
- Germany Installs More Solar Panels in December 2011 Than US Did All Year (treehugger.com)