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Published on January 17th, 2013 | by Andrew

15

Rising Solar Energy Output Drives German And French Power Prices To Record Lows

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January 17th, 2013 by  

Renewable energy critics and opponents continue to zoom in on the intermittent nature of solar and wind energy in their efforts to undermine and derail the transition away from centralized, mass production of energy based on burning fossil fuels.

Even at this early stage of a much belated evolutionary process, empirical evidence and ongoing technological advances, as well as pro clean energy and sustainable development polices and market developments, highlight the fallacy of their arguments.

Observed evidence (two examples here and here) indicates that coupled with adequate grid infrastructure and energy policy reform, solar and wind power generation — on and off-grid — can reduce carbon and greenhouse gas emissions and enhance the security and resiliency of power supplies without putting an excessive burden on consumers.

Not only does this benefit the environment and the health, well-being, and opportunities of current and future generations, but it’s also generating thousands of jobs and billions of dollars of investment and tax revenue each year.

Renewable Energy & Clean-Tech Paves the Pathway

Among developed countries, sunny Germany’s been at the forefront of the global drive towards building low-carbon societies based on clean, renewable energy resources, such as solar and wind energy.

Decades of private sector lobbying and practices and government policy actions — related to the banking/financial and energy sectors in particular —  all but brought down the US and international banking and financial system, led to global recessions, and have prompted wars, conflicts, growing inequality, and a pervasive sense of uncertainty and fear.

In contrast, federal government actions and energy policy reform in Germany have created an environment and conditions that have diversified, expanded, and made Germany’s economy more dynamic, robust, and resilient; driving employment to record-high levels and improving social and environmental conditions.

No doubt Germany is struggling to overcome obstacles and resistance to Premier Angela Merkel’s plan to eliminate reliance on nuclear power by building out solar and wind power generation capacity as replacements. This shouldn’t come as a surprise to anyone who cares to familiarize themselves with such revolutionary challenges. In fact, they make Germany’s success in this regard all the more remarkable.

Just yesterday, Bloomberg reported that contracts to deliver electricity for 2014 in Germany and France dropped to record-low levels. The reason? “Rising solar output is expected to cut demand for other electricity sources.”

Paraphrasing a research note from Per Lekander — an analyst at UBS’s Paris office — “As much as 18 percent of electricity demand may be replaced by solar panels not connected to Germany’s grid, reducing demand for other sources by 6 to 10 percent by 2020.”

“The unsubsidized solar growth should drive wholesale power prices further down,” Lekander added.

The availability of electricity generation capacity in Germany is expected to rise, with national electricity production forecast to increase to 64,200 megawatts (MW) on January 21 from 63,600 MW today, according to data from the European Energy Exchange’s Transparency Platform.

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About the Author

I've been reporting and writing on a wide range of topics at the nexus of economics, technology, ecology/environment and society for some five years now. Whether in Asia-Pacific, Europe, the Americas, Africa or the Middle East, issues related to these broad topical areas pose tremendous opportunities, as well as challenges, and define the quality of our lives, as well as our relationship to the natural environment.



  • PatBob

    That price differential will drive up the EEG charges that all electricity ratepayers in Germany pay to support the FiT. This is to pay for the difference between the market clearing price for electricity and the long term FiT payments to the solar and wind system owners (typically 20 year deals). I’m not saying that more renewable is a bad idea. But let’s put all the facts on the table when discussing the renewable energy market in Germany. And yes, I went there in June with a Fact Finding Mission to study how the Germans operate their renewable energy market and subsidies. Germans have almost the highest cost for electricity on a per kWh basis than any other industrialized nation, and about a third of that cost is to pay for the FiT. This is because German policy was for all costs associated with renewable energy to be socialized, including T&D related costs. This is also why the Bundestag voted in June (while we were there) to put a cap on the amount of solar that will be eligible to receive a FiT and to be more aggressive with decreasing the FiT rates based on installed capacity. They are currently planning on spending 100 billion euros or more on more transmission lines to get offshore wind energy in the North Sea to the load centers (almost all the planned transmission lines, from what the German federal energy regulator showed us, is north-south). They currently have to shut in a tremendous amount of wind energy at times because of this issue.

  • Chris Taylor

    There is no evidence that an expected hike in renewable energy production has lead to an overall energy price reduction. Coal is a global commodity and it’s price has fallen because of the success of shale gas in the US. Cheaper coal means cheaper energy.

    Ironically, as lower carbon fuels come more and more on line, coal is also gonna get cheaper too. Perhaps the worldwide increase in coal consumption through 2012 was due exactly to this.

    To get around this problem, coal and other fossil fuels need to be charged a fee on their CO2 potential. This fee should be passed back to every citizen to protect them from energy price increases. This will eventually lead to low carbon fuels being able to compete with fossil fuels without subsidies.

    • http://zacharyshahan.com/ Zachary Shahan

      Wouldn’t disagree.

  • josantora

    Comment on article: Rising Solar Energy Output Drives German & French Power Prices To Record Lows. January 17, 2013. Nice news for the price of electricity for end consumers but bad news for their taxes from which subsidies for solar energy came. From Economics 101 we know that the price of electricity that end consumers see in the market reflects the short run marginal cost (SRMC) or variable cost of the most expensive fuel (in Germany and France that will be gas). But the price that investors require is the long run marginal cost (LRMC) or levelized cost (cost of fuel + capital cost). Investors stop investing in a technology when the system’s SRMC covers fuel cost only and not capital. From the graph in this article, at Euro 45 per MWh, there is no incentive to build gas plants nor solar plants -unless there is a subsidy that will cover the investor’s capital cost. And that subsidy either comes from a tariff or from taxes. Both are paid by the citizens of Germany and France (same pocket) . As it was reported in The Economist (Economist Jan 5, 2013 “Coal in the rich world”), the lower prices are triggering back investments in coal generation rather. Sad.

    • Bob_Wallace

      Econ 101 also tells us that when electricity costs drops people have more money to spend on other things which increases economic activity and that creates more tax revenue for governments.

      Additionally lower electricity costs makes production cheaper which increases exports, creates more jobs, and increases tax revenue.

      Those additional revenues can be used to subsidize new clean energy. Europe will kill off coal and continue to move to renewable energy. Anyone who makes a long term investment in coal is a fool.

    • http://zacharyshahan.com/ Zachary Shahan

      2 things:

      1- solar and wind are lowering the wholesale price of electricity because of the Merit Order effect. you don’t seem to get that…

      2- the subsidies for polluting our planet and poisoning our bodies are tremendously larger than any subsidies for clean energy to date. why would you focus on a tiny stream when you’ve got a massive river to cross?

  • jburt56

    The goal should be to peg the meter at sunrise–as soon as the sun comes up the power generation zooms to 300% of that day’s maximum load, thereby leaving ample capacity for energy storage, hydrogen generation, etc.

    • http://www.facebook.com/jeffrey.todd1 Jeffrey Todd

      Burt….that’s incredibly expensive.

      • jburt56

        It’ll take until 2050 or beyond and could cost as much as an average of $1 trillion per year.

        • Bob_Wallace

          The US spends over $300 billion, at least 1/3rd of that trillion dollars, to deal with the health and environmental damage caused by coal.

          I suspect the rest of the world is going to save at least the remainder by getting coal off our grids.

          Then, after 2050 we save $1 trillion per year. And breathe better….

      • BasG

        This links shows the ever falling prices for Solar follow Moore’s law:
        http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

        So in 30 years it wil not be expensive anymore!

        • Bob_Wallace

          What do you consider expensive?

          If someone could put solar panels on their roof and generate electricity for a lower price than the average price of US electricity would that be “not expensive” electricity?

          Right now Germany is installing solar systems for an average price of $2.03/kWh.

          If you were to install a solar system in the US that would give you electricity for 8 to 10 cents per kWh. The average price of electricity is 12 cents.

          Your linked page is badly out of date. It states…

          “First Solar corporation has announced internal production costs (though not consumer prices) of 75 cents per watt, and expects to hit 50 cents per watt in production cost in 2016. If they hit their estimates, they’ll be beating the trend above by a considerable margin.”

          Thin film solar panels are already being sold for as little as $0.52/watt. Silicon panels are selling as low as $0.55/watt. Average prices are $0.62 and $0.66.

          Solar is no longer expensive. It’s not yet cheap, but cheap will be soon coming.

  • arun1

    With the planet burning up due to co2, we must build solar and wind farms on a war footing

    • http://zacharyshahan.com/ Zachary Shahan

      Agree.

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