Sunday, January 29, 2012

Debate Heats Up on German Solar Subsidies

Germany has put in place generous government supports to promote renewable energy sources in recent years, with the solar energy sector as one of the main beneficiaries.
File photo of workers installing solar panels on the roof of a
kindergarten in the town of Falkensee, near Berlin.

Europe's largest economy is now a global leader in solar energy, with the number of photovoltaic systems in use countrywide increasing significantly despite its lack of sunshine compared to countries in the south.

But solar energy is expensive, and German customers have had to pay billions of euros in subsidies to ensure the clean-power industry remains competitive.

The cost of the subsidies has sparked a heated political debate within Chancellor Angela Merkel's coalition government.

The junior coalition partners, the Liberals (FDP), and members of the economic wing of Merkel's conservative CDU party have called for a change in the way the subsidies in the industry have operated to date, accusing Environment Minister Norbert Roettgen of failing in his brief.

Roettgen is committed to a step-by-step reduction in solar subsidies, but this is not enough for Economy Minister Philipp Roesler, who feels the subsidy system needs to be overhauled to prevent costs from spiralling.

The Renewable Energy Sources Act (EEG) has encouraged the production of wind or solar energy with subsidies paid to producers.

Although the regulated price sinks year on year, rooftop solar power still commands a price of some 0.24 euros (0.31 dollars) per kilowatt hour.

That is way above the price at which the solar energy is sold on the market, which amounts to around 0.5 euros. The energy supply companies pass on these differential costs to the consumer by means of a surcharge on the electricity price.

The price of solar collectors has dropped in recent years thanks to the advent of cheap Chinese imports, making the solar energy business in Germany lucrative despite the sometimes unpredictable weather.

According to Germany's Federal Network Agency, solar energy capacity increased by 7,500 megawatts in 2011 owing to the installation of new units. This equates to the capacity of five nuclear power plants -provided the sun actually shines.

It is estimated that, including all the solar collectors installed in previous years, Germany now possesses a theoretical solar energy capacity of 20 gigawatts.

However, the reality is that solar parks and roof units cover just 3 per cent of its overall electricity needs, even though their owners pocketed more than 8 billion euros in subsidies in 2011.

This figure amounts to well over half of all subsidies handed out in Germany to promote renewable energy, which includes wind power, hydraulic power and biomass technology.

The legally fixed feed-in electricity tariff maintaining the subsidies is guaranteed for 20 years under the EEG. This has led critics to warn of consumers having to pay soaring surcharges over the coming years.

German consumers will have to pay 0.36 cents per kilowatt hour in clean-energy subsidies this year, a figure that is expected to increase.

The North Rhine-Westphalia Institute for Economic Research (RWI) has estimated that subsidies for photovoltaic systems to be paid between 2000 and 2031 will total around 100 billion euros.

Economy Minister Roesler, who is also vice-chancellor, believes there should only be subsidies for 1,000 megawatts of solar electricity per year.

Meanwhile - although many German firms initially profited from the subventions - competition from cheaper Chinese imports has changed the situation. Two major German companies - Solon and Solar Millennium -recently filed for bankruptcy.


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