Solar Subsidy Sinkhole

[lostinblue 1,989]

Re-Evaluating Germany's Blind Faith in the Sun

By Alexander Neubacher

DPAThe costs of subsidizing solar electricity have exceeded the 100-billion-euro mark in Germany, but poor results are jeopardizing the country's transition to renewable energy. The government is struggling to come up with a new concept to promote the inefficient technology in the future.

ANZEIGEThe only thing that's missing at the moment is sunshine. For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast.

As is so often the case in winter, all solar panels more or less stopped generating electricity at the same time. To avert power shortages, Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic. To offset the temporary loss of solar power, grid operator Tennet resorted to an emergency backup plan, powering up an old oil-fired plant in the Austrian city of Graz.

Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.

The distribution networks are not designed to allow tens of thousands of solar panel owners to switch at will between drawing electricity from the grid and feeding power into it. Because there are almost no storage options, the excess energy has to be destroyed at substantial cost. German consumers already complain about having to pay the second-highest electricity prices in Europe.

Solar Industry Facing Tough Economic Times

In the coming weeks, the German government intends to decide how it will treat solar energy in the future. The parliamentary leaders of the ruling center-right Christian Democratic Union (CDU) and the business-friendly Free Democratic Party (FDP) have written Environment Minister Norbert Röttgen a letter asking him to present a new subsidy concept by Jan. 25. Economy Minister Philipp Rösler (FDP) would prefer to abandon the current subsidization system altogether, as would the business wing of the CDU.

The FDP leader, who long ignored the subject of the energy transition, hopes to boost his profile by opposing solar subsidies. Rösler sees an opportunity to demonstrate that he, unlike his fellow cabinet minister Röttgen, has an understanding of economics, especially as he knows that many in the CDU, and its Bavarian sister party, the Christian Social Union (CSU), agree with him.

CDU deputy parliamentary floor leader Michael Fuchs has sharply attacked his fellow party member Röttgen. He holds the minister personally responsible for the rising cost of electricity. But Röttgen is fighting back. This week, he will meet with representatives of the solar industry, which faces tough economic times as a result of competition from China. Röttgen fears that fewer subsidies could put more German solar panel producers out of business.

The dispute over solar energy has the potential to widen divisions within an already shaky coalition. For many liberals and CDU/CSU politicians, the problems with solar subsidies are a symbol of mismanagement in the energy transition. Chancellor Angela Merkel's plan to finally set aside a conflict over nuclear energy that has been raging for years and develop new contingents of voters for conservative politicians is proving to be an economic failure.

A Massive Money Pit

Until now, Merkel had consistently touted the environmental sector's "opportunities for exports, development, technology and jobs." But now even members of her own staff are calling it a massive money pit.

New numbers issued by the pro-industry Rhine-Westphalia Institute for Economic Research (RWI) will only add fuel to the fire. The experts calculated the additional costs to consumers after more solar systems were connected to the grid than in any other previous month in December. Under Germany's Renewable Energy Law, each new system qualifies for 20 years of subsidies. A mountain of future payment obligations is beginning to take shape in front of consumers' eyes.

According to the RWI, the solar energy systems connected to the grid in 2011 alone will cost electricity customers about €18 billion in subsidy costs over the next 20 years. "The demand for subsidies is growing and growing," says RWI expert Manuel Frondel. If all commitments to pay subsidies so far are added together, Frondel adds, "we have already exceeded the €100 billion level."

The RWI also expects the green energy surcharge on electricity bills to go up again soon. It is currently 3.59 cents per kilowatt hour of electricity, a number the German government had actually pledged to cap at 3.5 cents. But because of the most recent developments, RWI expert Frondel predicts that the surcharge will soon increase to 4.7 cents per kilowatt hour. For the average family, this would amount to an additional charge of about €200 a year, in addition to the actual cost of electricity. Solar energy has the potential to become the most expensive mistake in German environmental policy. Berlin energy economist Georg Erdmann, a member of the monitoring group on the energy transition appointed by Chancellor Merkel, views the expansion of solar energy as a threat to the planned nuclear phase-out.

Part 2: Solar Energy's 'Extreme and Even Excessive Boom'

Another critical voice, the German Advisory Council on the Environment, argues that far too much money is being invested in solar energy. "Solar energy has recently experienced nothing less than an extreme and even excessive boom," says environmental expert Olav Hohmeyer, noting that this jeopardizes acceptance of renewable energy even before the energy transition has truly begun.

Solar lobbyists like to dazzle the public with impressive figures on the capability of solar energy. For example, they say that all installed systems together could generate a nominal output of more than 20 gigawatts, or twice as much energy as is currently being produced by the remaining German nuclear power plants.

But this is pure theory. The solar energy systems can only operate at this peak capacity when optimally exposed to the sun's rays (1,000 watts per square meter), at an optimum angle (48.2 degrees) and at the ideal solar module temperature (25 degrees Celsius, or 77 degrees Fahrenheit) -- in other words, under conditions that hardly ever exist outside a laboratory.

A Costly and Unnecessary Dual Structure

In fact, all German solar energy systems combined produce less electricity than two nuclear power plants. And even that number is sugarcoated, because solar energy in a relatively cloudy country like Germany has to be backed up with reserve power plants. This leads to a costly, and basically unnecessary, dual structure. Figures indicating the peak performance of solar energy systems are easily misunderstood, a report by the German Physical Society says. "Essentially," the report concludes, "solar energy cannot replace any additional power plants."

In Germany, solar is by far the most inefficient technology among renewable energy sources, and yet it receives the most subsidies. Some 56 percent of all green energy subsidies go to solar systems, which produce only 21 percent of subsidized energy.

The relationships are just the reverse for wind energy. For the same cost, wind supplies at least five times as much electricity as solar, while hydroelectric power plants generate six times as much. Even biomass plants are still three times as efficient as solar. Because of the poor electricity yield, solar energy production also saves little in the way of harmful carbon dioxide emissions, especially compared to other possible subsidization programs. To avoid a ton of CO2 emissions, one can spend €5 on insulating the roof of an old building, invest €20 in a new gas-fired power plant or sink about €500 into a new solar energy system.

The benefit to the climate is the same in all three cases. "From the standpoint of the climate, every solar system is a bad investment," says Joachim Weimann, an environmental economist in the eastern German city of Magdeburg. Hans-Werner Sinn of the Munich-based Ifo Institute for Economic Research calls solar energy a "waste of money at the expense of climate protection."

For a time, it seemed that at least the German solar industry was benefiting from the generous subsidy rates. But the green economic miracle has, in the case of the solar industry, turned out to be a subsidy bubble.

Germany's Declining Share in the Solar Business

In 2004, Germany held a 69 percent share of the global solar panel business. By 2011, it had declined to 20 percent. Former industry giant Solarworld, based in the western city of Bonn, is having problems. Solon and Solar Millennium, once considered model companies, have gone out of business. Schott Solar shut down a plant that was producing solar cells in Alzenau near Frankfurt, shedding 276 jobs and losing €16 million in government subsidies in the process.

Chinese competitors offer systems of equivalent quality at significantly lower prices. It appears that the subsidies have made the German manufacturers lethargic. They invest only 2 to 3 percent of revenues in research and development, compared with an average of 6 percent in the auto industry and about 30 percent in biomedicine.

Economics Minister Rösler wants to cap subsidies for solar energy systems. Under his proposal, further expansion would be limited to 1,000 megawatts this year, or 6,500 megawatts less than last year. A proposal by the Monopolies Commission, which is supported by the German Council of Economic Experts, goes even further.

The economists want to eliminate the subsidization of solar energy under the Renewable Energy Law. They argue that energy providers should be required to satisfy a green electricity quota, but without specifying in detail what they should do to fulfill the quota. This would stimulate competition to come up with the best technology.

According to the experts, the advantage over the current system is obvious: Money would no longer be invested in places where the highest subsidies are paid, but where the most green electricity can be generated.

Translated from the German by Christopher Sultan

http://www.spiegel.de/international/germany/solar-subsidy-sinkhole-re-evaluating-germany-s-blind-faith-in-the-sun-a-809439-2.html

[Mr. Big Dog 10,747]

Dug up an article from January to counter Steven's post? Clever. Look, they're re-evaluating the subsidies for solar power in Germany. It's what should happen. Government ought to look back and take stock of policy initiatives and evaluate whether they have or are on course to achieve the set goal. If they are not, then they need adjustments. Man, had we done this in the US, we'd have gotten rid of high end tax cuts that were supposed to create all these jobs years ago. I mean, they obviously haven't created any jobs nor have they made the economic pie any bigger as they were supposed to. But here in the US, we don't look at whether policies work or fail, we just pretend they're all good and keep moving along.

Edited November 24, 2012 by Mr. Big Dog

[Danno 1,228]

Dug up an article from January to counter Steven's post? Clever. Look, they're re-evaluating the subsidies for solar power in Germany. It's what should happen. Government ought to look back and take stock of policy initiatives and evaluate whether they have or are on course to achieve the set goal. If they are not, then they need adjustments. Man, had we done this in the US, we'd have gotten rid of high end tax cuts that were supposed to create all these jobs years ago. I mean, they obviously haven't created any jobs nor have they made the economic pie any bigger as they were supposed to. But here in the US, we don't look at whether policies work or fail, we just pretend they're all good and keep moving along.

No need to ramble on... just say "You guys were right" solar has very limited potential for Germany"

Of course not to kick a man when he's down but I don't mind reminded folks that Obamer too fell for the romantic notion of "green energy" ... he went so far as to stake the economy on it and promised "Green energy will lead our economy back".

What gets me is these folks are supposed to be the "sharpest knives in the drawer" when they don't seem much smarter than me (which ain't saying much).

I mean how could these these folks finagle their way through Ivey League schools and yet be taken in by the Snake oil?

Believe it or not, I sold Solar panels out in California at one time, out there it made sense. But germany or England, get real.

[Mr. Big Dog 10,747]

No need to ramble on... just say "You guys were right" solar has very limited potential for Germany"

Of course not to kick a man when he's down but I don't mind reminded folks that Obamer too fell for the romantic notion of "green energy" ... he went so far as to stake the economy on it and promised "Green energy will lead our economy back".

What gets me is these folks are supposed to be the "sharpest knives in the drawer" when they don't seem much smarter than me (which ain't saying much).

I mean how could these these folks finagle their way through Ivey League schools and yet be taken in by the Snake oil?

Believe it or not, I sold Solar panels out in California at one time, out there it made sense. But germany or England, get real.

Last year, Germany had 25GW of photovoltaic capacity vs. 4GW in the US. Once you realize that the sun sends more energy into our atmosphere in one hour than all of the world consumes in a year, you know that there really aren't many populated places in the world where solar energy isn't viable. Germany demonstrates that transformation to renewable energy sources is feasible. The country is a global leader in the renewable energy field. Germany will benefit greatly from the investments the country has made into these future technologies.

Oh, and don't be fooled. They are much smarter than you.

[Bad_Daddy 2,209]

http://www.slate.com/articles/news_and_politics/project_syndicate/2012/02/why_germany_is_phasing_out_its_solar_power_subsidies_.html

Goodnight Sunshine: Why Germany is cutting solar-power subsidies because they are expensive and inefficient

By Bjørn Lomborg|Posted Saturday, Feb. 18, 2012, at 7:30 AM ET

Germany once prided itself on being the “photovoltaic world champion”, doling out generous subsidies—totaling more than $130 billion, according to research from Germany’s Ruhr University—to citizens to invest in solar energy. But now the German government is vowing to cut the subsidies sooner than planned and to phase out support over the next five years. What went wrong?

Subsidizing green technology is affordable only if it is done in tiny, tokenistic amounts. Using the government’s generous subsidies, Germans installed 7.5 gigawatts of photovoltaic capacity last year, more than double what the government had deemed “acceptable.” It is estimated that this increase alone will lead to a $260 hike in the average consumer’s annual power bill.

According to Der Spiegel, even members of Chancellor Angela Merkel’s staff are now describing the policy as a massive money pit. Philipp Rösler, Germany’s minister of economics and technology, has called the spiraling solar subsidies a “threat to the economy.”

Germany’s enthusiasm for solar power is understandable. We could satisfy all of the world’s energy needs for an entire year if we could capture just one hour of the sun’s energy. Even with the inefficiency of current PV technology, we could meet the entire globe’s energy demand with solar panels by covering 250,000 square kilometers (155,342 square miles), about 2.6 percent of the Sahara Desert.

Unfortunately, Germany—like most of the world—is not as sunny as the Sahara. And, while sunlight is free, panels and installation are not. Solar power is at least four times more costly than energy produced by fossil fuels. It also has the distinct disadvantage of not working at night, when much electricity is consumed.

In the words of the German Association of Physicists, “solar energy cannot replace any additional power plants.” On short, overcast winter days, Germany’s 1.1 million solar-power systems can generate no electricity at all. The country is then forced to import considerable amounts of electricity from nuclear power plants in France and the Czech Republic.

Indeed, despite the massive investment, solar power accounts for only about 0.3 percent of Germany’s total energy. This is one of the key reasons why Germans now pay the second-highest price for electricity in the developed world (exceeded only by Denmark, which aims to be the “world wind-energy champion”). Germans pay three times more than their American counterparts.

Moreover, this sizeable investment does remarkably little to counter global warming. Even with unrealistically generous assumptions, the unimpressive net effect is that solar power reduces Germany’s CO2 emissions by roughly 8 million metric tons—or about 1 percent – for the next 20 years. To put it another way: By the end of the century, Germany’s $130 billion solar panel subsidies will have postponed temperature increases by 23 hours.

Using solar, Germany is paying about $1,000 per ton of CO2 reduced. The current CO2 price in Europe is $8. Germany could have cut 131 times as much CO2 for the same price. Instead, the Germans are wasting more than 99 cents of every euro that they plow into solar panels.

It gets worse: Because Germany is part of the European Union Emissions Trading System, the actual effect of extra solar panels in Germany leads to no CO2 reductions, because total emissions are already capped. Instead, the Germans simply allow other parts of the EU to emit more CO2. Germany’s solar panels have only made it cheaper for Portugal or Greece to use coal.

Defenders of Germany’s solar subsidies also claim that they have helped to create “green jobs.” But each job created by green-energy policies costs an average of $175,000—considerably more than job creation elsewhere in the economy, such as infrastructure or health care. And many “green jobs” are being exported to China, meaning that Europeans subsidize Chinese jobs, with no CO2 reductions.

Germany’s experiment with subsidizing inefficient solar technology has failed. What governments should do instead is to focus first on increasing research and development to make green-energy technology cheaper and more competitive. Production should be ramped up later.

In the meantime, Germans have paid about $130 billion for a climate-change policy that has no impact on global warming. They have subsidized Chinese jobs and other European countries’ reliance on dirty energy sources. And they have needlessly burdened their economy. As even many German officials would probably attest, governments elsewhere cannot afford to repeat the same mistake.

[lostinblue 1,989]

Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic. To offset the temporary loss of solar power, grid operator Tennet resorted to an emergency backup plan, powering up an old oil-fired plant in the Austrian city of Graz.

If you need a nuclear power plant to avoid grid shutdown then why have solar at all.From pure economics it makes no sense.Of course they could be like cities in China. One quarter of a city has power shut off for a few days when it is needed in the industural part.Sounds like a move for Germany.

[Bad_Daddy 2,209]

http://energyingermany.com/2012/11/10/green-energy-subsidies-uk-should-look-to-germany-for-cautionary-tale/

Green energy subsidies: UK should look to Germany for cautionary tale

How heavily should a state intervene in its energy sector? Virtually every developed state ponders this question. As a cautionary tale about subsidies for renewables gone wrong, it is worth looking at a fresh piece of German history.

The UK is at loggerheads on the future of its energy supply. As the new Energy Bill is to be published later this month, the debate is heating up. Conservative Energy Minister John Hayes has just provoked the more eco-friendly sectors of the public and shaken up the markets by questioning the UK’s need for onshore wind power. His comments have contradicted the very essence of London’s energy policy in recent years. More crucially, they show how confused and out of sync David Cameron and his ministers really are when it comes to this topic.

The Department for Energy and Climate Change, along with lobbyists for renewables and nuclear power, has been making the case for feed-in tariffs for months. These would give the utilities more room to calculate the expected revenue from, for example, a wind farm or a nuclear plant. That would spur on competition – whereas now, only big companies can afford to take the risk of a venture not being profitable.

Conservative politicians answer that feed-in tariffs would end up bolstering not only the renewables, but also the electricity prices – which is happening in Germany at the moment. In fact, German politicians are pondering about switching from feed-in tariffs to the utilities having to source certain portions of their electricity from renewable power. That is exactly the model that is used in the UK now. From a truly liberal point of view – party politics aside – feed-in tariffs are a step back.

Will subsidies create a flourishing industry?

The question behind the argument is: will the prices for renewables shrink quickly if the government throws money at the companies, be it through feed-in tariffs or other means? Will subsidies, in the long run, make UK engineers develop wind turbines, solar panels, nuclear plants or environment-friendly coal plants that the world wants to buy?

As a cautionary tale, it’s worth gazing across the north sea. Germany had been subsidising its solar power recklessly. Due to the state guaranteeing the revenues for 20 years, no home owner could put a foot wrong by putting a solar panel on his roof. Green Entrepreneurs like Frank Asbeck, founder of market leader Solarworld, became millionaires – and the costs were rising constantly.

Who had to pay for all that? Mr. Average had to. Each and every kilowatt hour of solar electricity had to be subsidized by the customers, through individual energy bills. So prices rose. Soon, Angela Merkel was facing a severe backlash – by the energy intensive industry which was faced with severely mounting production costs, by the lesser partner in her coalition and by consumer groups. Germany’s political leader gave in soon: last summer, subsidies were cut drastically.

German solar companies under pressure

Even earlier, German solar technology manufacturers had come under pressure from another angle: Chinese producers had begun flooding the market. Gigantic subsidies and lower wages gave and still give them the chance to produce at unmatched prices.

Taking into account that crisis-ridden European countries like Spain and Italy have also been cutting down their solar budgets, it’s easy to explain why German developers of solar parks and producers of solar panels have been folding one after another. Even for comparatively resilient companies like Solarworld, the stock value is plummeting. The subsidies that everybody had to pay through energy bills lead to exactly nothing. They were and still are an utter waste of money.

To be fair: subsidies as kick-starts for business sectors can be, and were many times, success stories. But this example goes to show that a government ramping up on green energy on a wave of public sentiment without a coherent strategy can end up shooting itself in the foot. Spending money on so-called sustainable technologies does not always prove to be so sustainable after all.

Update: Karl-Friedrich Lenz brought forward some criticism about this post. One valid point: the tariffs for solar subsidies have not been rising, as previously stated in paragraph 6 – only the costs have. His other assertions are discussed in a comment of mine.