German Solar Output Increases by 60% in 2011

@Steven

Sorry for the late response, had no time for blogging the last couple of days.

The 5 billion estimate is the German government's, not mine. They might need to adjust that upward since installations saw another world record last year with 7.5 GW over the year and 3.0 alone in December.

I do agree that this form of financing is regressive. On the other hand, it is only about 10 euros a month surcharge for all forms of renewable energy for the average consumer.

continuation of comment #18

I also wonder about the accuracy of the 5 billion Euro figure. The article claims 18.6 TWh of solar PV was produced this year. If the wiki I am glancing out now has correct data, the lowest FIT for solar PV was more than 21 Euro cents/kWh and some of the rates in 2004 were as much as 57 euro cents/kWh. If we use the 21 cent/kWh lower bound, 18.6 TWh production would require at least 3.9 Billion Euros just for solar PV, and the actual payments just to solar PV much more significantly more than that. There were also significant FIT payments for wind and biomass. Just the extant solar PV would seem to entail a minimum 3.9 Billion Euros for many years to come and the program isn't ending so costs in future years will continue to climb. I'd guess that the real FIT payments for solar PV are already more than 5 billion Euro, that wind and biomass FITs are significant, and that the program costs continue to grow at a significant rate.

I don't think the program's high costs were warranted by the limited success--3% is only a tiny start at solving the energy problem. I also think that billing ratepayers is a regressive funding mechanism. Why should a poor pensioner living in a tiny apartment fund the solar array on the roof of a large mansion or a business. It would seem fairer if energy subsides came from the general treasury and the true costs were more transparent.
Steven

Regarding Karl's remarks in comment #17:
Karl estimates German solar investment as 5 billion EU/year because that is the estimated FIT payments they are now committed to pay. I don't think this is the best way of accounting for solar investment. Ideally, I'd like to know what the expenditures were in each year for new equipment installs. This would presumably be much higher than 5 billion Euros/year. FIT schemes are a form of deficit spending because they use future obligations to fund current spending; thus, the 5 billion Euro/year figure does not tell you directly what the market value of current investment is, it merely gives information on how the current spending is being financed.

Karl compares the yearly FIT payments to various costs from natural disasters. I don't see the utility in this. I would, however, be interested in cost comparisons to other forms of energy production (wind, geothermal, etc.) to costs of efficiency measures, etc. An analysis of how direct spending on R&D would have altered pricing would also be interesting. If we want to know whether FITs were useful we need to understand whether they were the most efficient means by which to achieve various renewable energy goals.

continued

@ Steven

You are of course right that popular decisions are not always wise. And there is no way to prove that without feed-in tariffs there would have been the same price reduction speed.

On the other hand, it makes sense that the German market, the largest in the world, has contributed significantly to reaching scale. SPIEGEL just reported that 2011 saw another record of 7.5 GW installation, even at much lower feed-in tariffs:

k.lenz.name/LB/?p=5894

And the alternative is much higher costs from natural disasters. A March 2011 German government report estimates solar feed-in tariff costs at around 5 billion a year until 2020, from which time on the costs only decline:

is.gd/PWS3N8 at page 142

In contrast, 2011 saw record damages from natural disasters at $310 billion, only $80 billion of which were insured.

Munich Re report, k-lenz.de/1038

5 billion Euro a year is a bargain compared to that.

In comment #16 Karl writes:
"This is also a good opportunity that the latest poll showed that 61% of Germans support paying these surcharges:

http://k.lenz.name/LB/?p=5882"

It may well be true that the FITs are popular in Germany. At the time it was introduced the Euro was popular too, but already sound reasons for regret are all too clear on that score. Public opinion is often not informed by the best economic theories so popular decisions are not always wise decisions.

Karl also writes: "Without the feed-in tariffs, there would not have been a mass market. Without the mass market, no or at least very much slower price reductions."

Without FITs there would have been significantly less solar PV produced, but price reductions might very well be very close to where they are today. PV prices have been declining rapidly for decades without massive production subsidies and that trend would have continued even if the only thing driving it was the off-grid market and R&D subsidies from countries taking the long view toward deployment. Trying to bend a price vs. time curve by production subsidies is a very expensive endeavor. Had Germany poured a much smaller amount of money into R&D for several technologies you would probably see a 3% production level delayed by only a couple years and a greater range of options for renewable energy being developed.
Steven

Steven:

Thank you for pointing out that the Wikipedia article does not reflect the newest data.

That can be found at this March 2011 press release of BDEW, the German Energy Industry Association.

http://www.bdew.de/internet.nsf/id/DE_20100311_PM_46_Prozent_des_Strompreises_sind_Steuern_und_Abgaben

They estimate 10.30 Euro surcharge per month for average consumers, who would pay 72.77 Euro retail price. So that makes the surcharge part about 14.15%.

Without the feed-in tariffs, there would not have been a mass market. Without the mass market, no or at least very much slower price reductions.

This is also a good opportunity that the latest poll showed that 61% of Germans support paying these surcharges:

http://k.lenz.name/LB/?p=5882

Continuation of #14:

Karl also claims: "the biggest effect of the feed-in tariff law was to enable mass production and the dramatic drop in costs coming from that."

The FITs have caused boom and bust cycles in the PV industry; this is certain. Less certain is any relationship between FITs and long term price declines. Several years ago FITs caused a shortage in silicon that artificially inflated prices. There is now a glut so we observed a recent very large price swing. In the absence of top-down market control price decreases would have been more steady and there is little evidence to suggest that they would not be similar to what they are today. All nascent technologies experience rapid price declines and we should not necessarily attribute those for PV to FIT policies. Prices for computer memory were in the ballpark of $30/MB in 1995 and dropped by about a factor of 1000 between then and now--all without ANY subsidies. German rate payers will be forking over the ~$0.046/kWh costs for decades (and the rate may increase significantly), but benefits from the policy are exaggerated.
Steven

Karl writes in comment #13:
'In answer to the post above comparing the 3.5 cents Euro surcharge to American retail prices:

In Germany, the surcharge is only about 8.5% of retail price:
http://de.wikipedia.org/wiki/Strompreis'

The 2012 rate is 3.592 euro cents/kWh. Todays exchange rate is 1.28 dollars/euro (it has been dropping with the Euro woes) so $0.046/kWh. Karl claims the 3.53 euro cent rate for 2011 was 8.5% of the of the retail electricity rate, but he is referring to a 2010 chart back when the EEG was only 2.047 euro cents/kWh (the huge 2011 EEG increase should also worry anyone contemplating similar policy). If we correct Karl's error we can estimate retail electricity prices as 2.047/.085= 24.08 euro cent/kWh =$0.308/kWh or fully triple the US rate. One has to wonder why the average retail electricity rate is so high when their generation base is mainly cheap coal and nuclear power. Due partly to Germany's mild climate, per capita electricity usage is relatively modest. In the US paying $0.30/kWh would be a huge hardship for many ratepayers and is totally off the table for countries such as China and India. German electricity rates, and the policies that drive them, are a scandal--not a model for the rest of the world.

Continued

In answer to the post above comparing the 3.5 cents Euro surcharge to American retail prices:

In Germany, the surcharge is only about 8.5% of retail price:

http://de.wikipedia.org/wiki/Strompreis

"Only" 3% is still 18.6 TWh. as noted in the article above. There are many countries world wide that use less electricity from all sources.

And while I agree that Germany is not the best solar location world wide, the biggest effect of the feed-in tariff law was to enable mass production and the dramatic drop in costs coming from that. That is one of the stated goals of the German law on renewable energy, and it has been reached quite convincingly.

Solar and wind energy will save Germany enough in oil imports to still provide electricity at half of what it costs in USA
Why can not we do the same long term investment ,even better into home roofs that benefit most tax paying home owners?

If someone told me that I would have to pay an extra 50% now for electricity for a period of 4-5 years , but in the future my utility prices will be forever 25% less (or more) and the country itself will see cleaner air and not be as dependent on fossil fuels. I would say go for it. What the heck, I essentially did pay 2,000 percent (yes that is two comma zero zero zero) more for electricity in 2010, so that my electric bill will be negligible for the rest of my life. But then I could afford the upfront cost of a solar array.

Go Germany! Down with Steven!

In response to EAK's remarks in comment #7:
Progress should always be measured against costs if one is to gain insight into efficiency. In Germany the costs are very, very high (an increase in energy costs of $0.05/kWh would be a HUGE burden almost anywhere else in the world) and progress is very modest (3% solar PV generation). If the goal is to get to a 100% carbon-free electricity-generation scheme, these costs are unsustainable. If the coal is to improve air quality, better scrubbers on existing power plants would improve air quality at vastly greater efficiency. Phasing out nuclear plants early perpetuates a dependency on coal, removes one of the cleaner generation schemes, and further increases electricity costs. German energy policy is hardly a model for the rest of the world.
Steven

What anonymous does not figure in his calculations, is the cost of NOT using clean energy sources, such as health issues that arise when the air we breath is not as free of pollutants as possible and the effect of increased carbon in the atmosphere on the the climate. In addition unlike coal-fired or nuclear the source of the energy (solar and wind) is free.

It would be well to remember that German residential electricity customers will be paying an additional $0.05/kWh this year to support their splurge on FITs. This is about 50% of the average cost of electricity in the US. That is a very high price to pay for reaching ~3% solar PV generation.
Steven

Germany is showing the way to make PV work. In the UK we are cutting our FIT payment to 0.21pence only after less than a year and a half. Need need more investment. Come on UK wake up http://www.exploresolar.co.uk

Shame on us ,if anything USA,Canada and Japan should be competing with Germany and China for increase in their solar ,wind and geothermal generation
Wise policy that will certainly pay off as fossil fuels continue to cost more

While Germany and China are leading in the future clean energy technology, Republicans in America and Canadian politicians are beholden to dirty fossil fuel industry. Only silver lining is that President Obama increased funding for renewable energy more than any other president in recent history. Instead of being commended, he is being blamed for supporting the renewable energy.

A couple of additional figures:

Renewable energy is estimated to save transmission grid costs of 437 million Euro in 2012 (solar electricity is often consumed where it is generated).

Photovoltaic solar generation is expected to reach 40 TWh in 2016. The number estimated for all renewable sources in 2016 is 167 TWh, 39% of which will be marketed directly. The reform of the relevant law last summer had transition to a more market-based system as one of its goals.

All of the above figures from the 66 page PDF December 2011 report by the German Energy Industry Association (BDEW), found at

http://k-lenz.de/1036

GO GERMANY!
SHOW THE WORLD WHAT IS TO LEAD!