Published on October 5th, 2016 | by Tobias Engelmeier0
Can India Learn From Germany’s Solar Experience?
October 5th, 2016 by Tobias Engelmeier
Over the past few years, as the German solar market has slowed to a steady, unsubsidized pace, India has emerged as one of the most dynamic new markets. It wants to build as much as 40 GW rooftop solar by 2022 and a total of 100 GW.
Is the German solar story a success that India can learn from? Clearly, the political tools Germany employed — the feed-in tariff and the comprehensive renewable energy law — worked well (and arguably better than the government anticipated). They created a secure, predictable and attractive market environment, enabling the growth of an entirely new industry with skills, know-how and innovation.
A second success is grid management. Despite great fears that infirm wind and solar power will destabilize supply, the country still has one of the most reliable electricity grids in the world. Operators have learned to work with higher volatility and more market complexity. This experience is central to the development of future ‘smart’ grids and constitutes a competitive advantage for German companies. Secondly, German solar power growth has been a catalyst for cost reduction globally. Without German power consumers paying for solar power (and without Chinese tax payers subsidizing solar panel manufacturers), the spectacular 80% cost reduction in the past 15 years would not have been possible.
On a key metric, however, Germany’s solar story is not really a success. The country wanted to decarbonize the electricity sector (while at the same time retiring nuclear power plants). Today, renewables contribute around 30% to the German electricity mix. The largest share comes from wind (13%). Solar contributes only 6%. Overall, decarbonization is not on track for achieving the target of 40% reduction by 2020 compared to 1990. This is mostly due to the heavy use of dirty lignite instead of far less carbon-intensive natural gas, which in turn is an unintended consequence of the dynamics of the electricity market following the growth of renewables.
India cannot learn much from Germany. Conditions are fundamentally different. Germany clearly had a climate and an ecological motive for its ‘Energiewende’. It was ready to pay extra for clean power. Also, it made changes on a plateau of slightly falling power demand.
India’s priorities are elsewhere: how to ramp up overall power generation fast enough to fuel industrial growth, how to increase energy security, how to reduce local pollution, and how to provide power to the millions still without reliable grid power supply. India has formulated its ambitious 100 GW target (and signed on the Paris Agreement in 2015) because its politicians recognise that solar is a cost competitive and quick-to-implement option. Germany’s solar feed-in tariff adds around Rs 4 to each kWh consumed. This would be unacceptable in India, where solar will soon reduce the average cost of power.
Read here for a more detailed version of this analysis.