Rhein on Energy and Climate

More than any other nation Germans have been seduced by the prospect of solar power generation since it has been possible to generate electricity through photovoltaic cells in the 1980`s.

Behind this enthusiasm were scores of committed pioneers, tens of thousands of households eager to generate their own roof-electricity and governments setting high hopes on solar industries.

Thanks to generous feed-in tariffs Germany has installed more solar capacity than any other country on earth, some 26 GW, the equivalent of its nuclear capacity. But due to low solar insulation PV still supplies less than five per cent of German power consumption.

German electricity consumers have paid a high price for this achievement by financing the high feed-in tariffs, initially set at 50 cents/kWh.

By the middle of 2013 its solar industry is in shambles.

Like the rest of the world, it has to cope with global overcapacity and losses, forcing big and small companies to write off substantial investments or to specialise in high-tech applications for exports to Asia and America.

In view of the steep fall of costs and prices the government has little choice but to gradually phase out feed-in tariffs and let the remaining industry compete on its own.

There is one major lesson to learn from the German solar adventure.

Governments should be careful when trying to boost new industries. Protection and assistance may be necessary, but they need to be transitional and never insulate from global competition.

In Germany government and industry have too long ignored the impressive Chinese advances in lowering production costs. Feed-in tariffs should have been adapted much earlier to take into account the dramatic decline in prices and insufficient grid capacity.

Germany has been more prudent and successful in supporting wind power, its biggest source of renewable energy, with substantially lower feed-in tariffs.

The German economy is strong enough to digest several billion Euro losses on solar investments by dozens of bold SME`s and two super stars of German industry (Bosch and Siemens) and the high electricity rates that households and business had to pay for financing feed-in tariffs.

Whatever criticism, Germany has made a decisive contribution to global PV electricity development, which has become the third most important renewable source of energy after hydro and wind power and is bound to gain more and more ground, especially along the earth’s sun belt.

Brussels 24.06 2011 Eberhard Rheinen

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