Germany’s decision to cut the level of feed-in tariffs for solar energy has come at a time when a number of other countries are forging an opposite path.
The US, the UK and many others are ramping up incentives for homeowners to install rooftop solar panels in an effort to reduce carbon emissions and create jobs. In the case of the UK, the government is offering a tariff of £0.413 ($0.628) per kilowatt-hour, with an inflation-proof escalator for a guaranteed 25 years, for solar photovoltaic (PV) systems up to 4 kW from 1 April.
The level of subsidy is viewed by some as excessively generous, coming under attack even from environmentalists. George Monbiot, perhaps the most well-known British green campaigner, labelled the UK’s feed-in tariff “a con”, dismissed rooftop solar installations as “useless fashion accessories”, and argued for the £8.6 billion earmarked for the 25 year scheme to be spent on utility-scale wind and other large-scale renewable projects.
One would expect such a reaction, perhaps, from a vertically integrated utility company and not a leading environmentalist. In any case, Monbiot is misguided. The purpose of feed-in tariffs is to develop a momentum for renewable energy technologies that will quickly turn them from relatively expensive innovations to mature market technologies.
Electricity bill payers are already underwriting the UK’s colossal expansion in offshore wind and other renewables. Rooftop solar PV can perform useful grid balancing duties, as well create jobs, lower carbon emissions, alleviate fuel poverty and play a role in addressing the UK’s ‘energy gap’. PEi welcomes the opportunity for householders to be rewarded for installing their own power capacity.
German readers may be experiencing a touch of déjà-vu reading this. It was way back in 1991, under the tutelage of Chancellor Helmut Kohl, that Germany first introduced feed-in tariffs to encourage the development of the renewable energy industry.
Almost 20 years later, as this month’s cover story (Germany’s solar PV industry: A victim of its own success?, page 22) explores, Germany’s energy ministry has announced that feed-in tariffs for solar power will be slashed to promote free competition and bring an end to the days of “guaranteed existence” for market participants. Feed-in tariffs for new roof-mounted solar PV will be cut by 15 per cent in April, with a further cut of 2.5 per cent from 2011 if installations exceed 3.5 GW in the previous 12 months.
The cut is not unexpected, but several panel manufacturers warn the cuts will reduce foreign investment in German companies and cause German solar panel manufacturers to lose global market share. Others see the cuts as beneficial to Germany’s solar industry, as they are likely to force down costs, bring about consolidation and drive technological innovation.
The scaling down of Germany’s solar feed-in tariffs is an inevitable consequence of a remarkably successful scheme. In the years since it introduced its far-sighted policy, far from sun-drenched Germany has become a world leader in solar power boosting foreign exports as well as creating tens if not hundreds of thousands of jobs, typically in economically-deprived regions.
The 2003 Renewable Energy Sources Act (EEG), which introduced more generous tariffs for rooftop solar PV, was the real catalyst for the German renewables revolution. Between 2003 and 2008, Germany installed more than 5.3 GW of solar PV and is currently adding around 2.5 GW a year.
Far from being “useless fashion accessories”, solar panels have become one of the most powerful engines of German economic regeneration. As developed nations around the world struggle to return to growth following the worst financial crisis in history, it may be wise to concentrate less on financial engineering and focus on real engineering.
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