Report Says Germany’s PV Experience Represents Lessons Learned For Solar Adoption

Posted by SI Staff on August 01, 2014 No Comments
Categories : Policy Watch

As an early and enthusiastic adopter of solar power, Germany has long been held up as an example for other nations to follow. Recent disruptions in the electricity markets and grid distribution system have turned some of this experience into a cautionary tale.

In an effort to check some of these revisionist impulses, the Solar Energy Industries Association (SEIA) commissioned the Brattle Group to prepare a report outlining the major lessons learned from the past decade of solar photovoltaic energy support in Germany.

First and foremost, the report says, Germany's solar PV support program has been instrumental in bringing down the cost of solar PV. Since 2007, the report says, average installation costs have fallen from close to EUR 5.00/W to between EUR 1.00/W and EUR 2.00/W. At the same time, the report cautions, associating the high residential retail prices of electricity in Germany purely with the solar PV and other renewable support programs is misleading.

While retail prices of approximately EUR 0.30/kWh for residential, commercial and small industrial customers are among the highest in the world, the renewables levy – now above EUR 0.06/kWh – is comparable to other tariff elements, such as taxes and fees, are of comparable magnitude and have increased at similar rates.

At the same time, the report observes that payments for solar PV have increased substantially in the past few years. Until 2007, annual payments to solar PV installations under the feed-in tariff (FIT) program remained below EUR 2 billion, but increased rapidly to close to EUR 10 billion by 2013 and are expected to increase to about EUR 11 billion per year before leveling off and ultimately declining. The increases in FIT payments beyond those initially foreseen were driven by the large expansion of solar PV between 2009 and 2012. In hindsight, the report says, it would have been preferable to have designed automatic adjustments to the FITs based on installation criteria designated at the outset rather than adjusting the program ad hoc.

Regardless, the report says that recent economic difficulties in Germany cannot all be laid at the door of solar PV adoption. Heavy electricity users in industrial sectors exposed to international trade have been exempt from a significant portion of the renewables levy, the report notes, and generally face electricity prices in line with or even below other European competitors. As a result, there is little reason to expect that Germany's solar PV support program has hurt the competitive position of German industry to date, including the relatively few remaining very energy-intensive industrial sectors, the report says.

While an optimized FIT design might have lowered the cost impact of Germany's solar PV program for retail customers – except the exempt industrial users – the report says high costs incurred to date are not a good reason to abandon the solar PV program now. Because PV costs have come down dramatically, at least partially as a result of the FIT program, building the remaining roughly 16 GW of solar PV to reach the 52 GW target as part of Germany's broader commitments to reducing greenhouse-gas emissions from its power sector will lead to only a very small additional costs to customers, the report says.

The report says that while the reforms represent an effort to improve the design of the FIT system by making the payments more responsive to desired installation levels, they should not be interpreted as an overall failure of this system. Because aggressive greenhouse-gas reduction targets are widespread, including in the U.S., the report concludes that Germany's experience provides an opportunity to see how electricity systems and the rules governing them will have to adapt when penetration rates of various renewable energy sources reach levels similar to those in Germany today and beyond.

‘When you examine all of the facts, Germany is a lesson to be learned from, not an experience to be avoided,’ says Rhone Resch, SEIA president and CEO. ‘Admittedly, the costs of Germany's renewable support programs, including solar PV, have been significant – and higher than expected. But that's only part of the story. As the report pointed out, there is also significant evidence that increased power production from the use of solar and other renewables is a major contributor to falling wholesale market prices in Germany, while also helping to significantly reduce pollution. For the United States, the goal should be to improve solar support programs, not eliminate them. This new report reinforces that objective.’

The full report can be found here.

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