The Brattle Group recently completed a report on Germany’s past decade of solar energy policies and progress for the Solar Energy Industries Association (SEIA). There’s some missed messaging and unhelpful messaging in there, but overall it’s an excellent report — I’d give it an A+. There are several points from the report that I want to highlight. The first is the point SEIA highlights in a press release:
Most importantly, the report finds: “By and large, the German path has been remarkably successful, given the goal – shared by a great majority of the population – of ‘de-fossilizing’ Germany’s electricity sector.”
Let’s Not Go Overboard with Cost Claims
One of the biggest problems with how much of the media and many commenters discuss Germany’s solar energy costs and electricity costs is that they equate the two. In actuality, Germany’s high electricity prices are the result of many factors. The country taxes electricity use, which actually makes sense — you want to tax harmful activities in order to limit them; taxing productive activities like work makes a lot less sense. Furthermore, the costs of renewable energy such as solar feed-in tariffs are born more by residential and commercial consumers in Germany specifically because many industries are exempt.
“While the costs of electricity to most end use customers have indeed increased, it is important to note that the size of the renewables levy by itself is an incomplete (and likely exaggerated) measure of the cost of the program to consumers. It is also important to note that exemptions for trade-sensitive and energy-intensive industries contribute to higher rates for non-exempt consumers,” the report notes.
Later on, it adds: “associating the high residential retail prices of electricity in Germany purely with the solar PV and other renewable support programs would be misleading. It is true that retail prices (for residential, commercial and small industrial customers) are among the highest in the world. However, while the renewables levy, now above 6 €cents/kWh, represents a significant portion of those rates of approximately 30 €cents/kWh, other tariff elements such as taxes and fees are of comparable magnitude and have increased at similar rates. Therefore, Germany’s residential retail tariffs would be among the highest in the world even without paying for Germany’s renewable let alone solar program.”
Furthermore, costs are only one side of the equation. Renewable energy and especially solar help to reduce wholesale electricity prices (which industries actually benefit from without contributing to the extra price of solar), and they also reduce significant health costs that come from burning dirty energy. In several studies, it has been found that the extra costs of solar are lower than the extra benefits. Nonetheless, people consistently talk about the estimated costs and ignore the estimated financial benefits.
Lastly, for this section, I’ll just add that solar power’s costs are more linked to labor, and especially local labor, than the costs of dirty energy sources. Hundreds of thousands of jobs have been created in Germany to support its renewable energy industries, especially solar energy industries.
“While renewable energy policy likely remains a relatively minor contributor to Germany’s overall economic performance, Germany is experiencing an economic boom with higher than ever exports and low unemployment rates when compared to most EU countries and also when compared to the United States,” the report adds.
Germany Is Succeeding
Many energy “experts” try to argue that other systems for supporting solar have been more successful. That’s simply not true. Feed-in tariffs have driven the majority of the world’s installed solar power, and Germany’s feed-in tariff policy was a critical factor that drove down solar PV panel costs for the rest of the world. This new report concurs:
There is significant evidence that FIT based systems, which provide the revenue certainty needed to attract low-cost financing for renewable energy, allow for lower cost renewable energy procurement than most of the alternatives used in the United States, in particular certificate based systems using Renewable Energy Certificates (RECs). Therefore, if, as is the case in Germany, democratic support for a transition away from conventional and towards renewable energy is strong, the use of well-designed FITs is likely superior to alternative regulatory support mechanisms, especially during the early phases of renewable technology development. At a share of renewable energy in excess of 20% and after more than a decade of support, prices for power from new renewable projects are now close enough to the cost of new conventional generation that a transition towards a more market-based approach seems justified.
In other words, Germany’s solar feed-in tariffs have been a whopping success, better than anything used in the US.
“The primary lessons from the German experience are that a system of FITs such as the one used in Germany can be highly effective in promoting the growth of solar PV,” the report notes.
Germany’s Solar Feed-in Tariffs Have Brought Down the Cost of Solar PV Panels
One important point not lost on many Germans but lost on much of the rest of the world is that Germany’s strong and stable solar feed-in tariffs helped to bring down the cost of solar PV panels a great deal. Solar panel prices have dropped off a cliff in recent years, and much of that is due to Germany’s wise investments. This is actually the first point the report makes in its executive summary:
First, there is widespread acknowledgement that Germany’s solar PV support program has been instrumental in bringing down the cost of solar PV. Since 2007, average installation costs have fallen from close to €5 per Watt to between €1-2 per Watt. In that sense, earlier investments are paying off in terms of much lower installation costs today.
Economies of scale help to bring down cost. At this stage of solar’s development, they do so much more than R&D in the lab. Germany has contributed more to the scaling up of solar PV manufacturing than any other country, on the demand side of things. In fact, at the end of 2012, Germany accounted for nearly ⅓ of global solar PV capacity!
Germany Has Supported Coal & Nuclear Far More Than Renewables
One of the most annoying things that anti-renewable commentators do is act as if dirty energy sources have never received (and don’t continue to receive) considerable government support. This Brattle Group/SEIA report does a good job of highlighting that cumulative support (between 1970 and 2012) for coal and nuclear power has been far greater than cumulative support for renewable energy. Hard coal is on the left, then brown coal, then nuclear energy, then renewable energy:
As you can see, support for hard coal alone is over 4½ times greater than support for all types of renewable energy. Support for hard coal and brown coal is approximately 6 times greater than for all types of renewables combined. And support for nuclear energy is over 3 times greater than for all types of renewables combined.
Honestly, looking at these charts, I’d say that renewable energy deserves a ton more governmental support than it receives.
The Brattle Group/SEIA report closes with an excellent line. It brings into the discussion the fact that energy independence provides great energy and economic security. Germany would have been in a much more difficult situation with the recent crisis in Ukraine if it were not for the country’s strong renewable energy market. But this sort of energy independence is important all around the world, especially if we take into account oil and the potential to electrify our ground transport.
Here’s the closing line from the report: “As the recent Ukraine crisis has shown, the transition has also helped reduce the exposure of Germany to potentially volatile input prices to the traditional power system, a benefit that has largely remained unquantified, but could prove significant in the future.”
The report has much more in it that I think is worth a read, and many charts and graphs. Have a look if you’d like to dig in a bit further, and feel free to drop more highlights in the comments below.