Germany’s environmental minister has announced that subsidies for solar power, which have created a boom in the past three years, will end no later than 2018.
The German Energiewende or energy revolution has been based on significant government subsidies. This subsidy, which is known as the feed in tariff, guarantees the grid will purchase energy from small renewable producers at a guaranteed rate and also that these producers get to sell their energy before large energy companies burning coal, oil or gas. The result has been a solar boom. Today, roughly half of the installed solar capacity in the world is located in Germany.
But those price subsidies cost significant amounts of money. In Germany much of that money comes from average electricity consumers who have seen their bills skyrocket. Analysts predicted the cost of subsidies would be a full 50 percent of an average consumer’s bill in 2013. System wide, critics estimate that Germans are paying $23 billion a year for electricity that has a market value of just under $4 billion.
The solar boom also created a number of other problems. For one, it turns out solar is not an ideal solution in the German climate. While the total potential energy that could be produced by all of these solar panels is immense, in practice they produce zero energy at night and very little during the cold months of the year. When the panels do produce maximum output, such as sunny summer days, that too becomes a problem:
On 16 June this year, solar and wind energy combined
to produce 60% of Germany’s power needs. So much solar was coming into
the grid that wholesale prices on that afternoon were, for a time, in
For the big utility companies, this is a nightmare scenario.
Their business model means they recoup their investments in large gas-
and coal-fired power stations by a steady demand for their electricity
over a long period of time.
But because the feed-in tariff gives small renewable
producers priority access to the grid, the big boys can only make money
when the Sun doesn’t show and the wind doesn’t blow.
On days like 16 June, expensive gas-fired power plants stood idly by while the solar cells sizzled.
As a result of this unpredictability in the market, big producers have resorted to the cheapest source of energy available to keep their plants going: coal. This is why CO2 emissions went up in Germany last year despite all the solar panels.
Originally the subsidies were set to continue for 20 years and was anticipated to cost $100 billion euros (about $128 billion) over that time. Now the subsidy will be cut when total generation reaches 52 gigawatts. It is expected that will take no 4-5 more years.