Germany and Spain’s Solar Market Cast Shadow in the U.S.

Ken Silverstein | Aug 20, 2013


Should the United States look to Europe to determine whether progressive renewable energy policies are worth pursuing? Government subsidies there are playing a big part, all in an effort to help the continent reach its goal of increasing its renewable generation mix from 7 percent today to 20 percent by 2020.

The ultimate aim is to reduce greenhouse gas emissions tied to global warming. The European Union is a global leader and as such the member nations enacted incentive programs to achieve their desired results. It has helped boost solar power there. Growing demand, in fact, has helped reduce production costs through the advancement of solar-cell designs and manufacturing processes.

This discussion will highlight two countries: Germany and Spain, and then try to link their experiences back to the United States. In May 2012, Germany made headlines when at one defined point it generated 22,000 megawatts from solar power, which is roughly half of the country’s electricity needs. Renewable advocates then hailed that short moment as a shining example of what clean energy could become -- reliable, emissions free and dominant.

Renewables, in fact, comprised 23 percent of Germany’s electricity mix in 2012. One of the keys to this growth has been "feed-in tariffs." Such government incentives guarantee each plant operator a fixed tariff for electricity generated that is channeled into the grid. Each grid system operator is obliged to pay the statutory fee, which is dependent on the technology used and the year of installation.

Skeptics, conversely, took the opportunity to remark that the solar sector there is so heavily subsidized that it is hurting the national economy. Germany is planning to cut that support by about $2.5 billion.

Meantime, Germany remains committed to closing its 17 nuclear generating stations, which had provided a quarter of the country’s electricity mix.

Authorities have already shutdown eight such reactors, with the rest providing 18 percent of the country’s electric power. That has enabled coal to gain a foothold there. The World Nuclear Association says that coal has increased its market there from 43 percent in 2010 to 52 percent this year. E.ON, RWE and Vattenfall are all impacted by the closures.

Declining Subsidies

The result: Bloomberg news service is reporting that Germany’s Environment Ministry said that carbon dioxide equivalents rose from 917 million tons in 2011 to 931 million tons in 2012.

But Amory Lovins, chairman of the Rocky Mountain Institute, says that the math is wrong: Renewables have more than offset nuclear energy’s contributions. The increased use of coal is the result of rising natural gas prices. “Anti-renewables reports often claim that Germany is going back to coal because renewables didn’t work and are proving unaffordable. Actually, they work just fine.”

He also says that anti-greenies like to propagate the myth that the German grid is unable to handle increasing amounts of renewable generation. He says that the country ranks first in European grid reliability and has scored better than the networks used in the United States by a favor of 10.

Finally, Lovins says that the cost of the feed-in-tariffs that have helped support the German solar sector are expected to fall as the cost of the associated technologies decline. GTM Research says that the average residential solar system fell by 18 percent last year while non-residential prices dropped by 13 percent, as reported by GreenTech Media.

Spain, too, is a hotbed for renewable energy development -- and dissension as to whether government has reached too far. In 2010, 23 percent of its electricity was generated from wind and solar energy. But the feed-in-tariff deficit there is now $29.5 billion. Policies are in place to cut the subsidies, which is also expected to result in the burning of more fossil fuels.

“The level of the tariff deficit has reached a magnitude that makes it unsustainable and requires effective measures,” says the Department of Foundations of Economic Analysis at the University of the Basque Country in Spain, in a report. “Through tariff deficits, regulators have allowed transferring part of the present costs of the electricity service to future consumers but this cannot be done indefinitely and a deep revision of regulation in this market is in order.”

As for the United States, federal spending aimed at clean energy technologies will total $150 billion from 2009 to 2014. The massive injection will soon end. But the annual subsidies to wind and solar could continue in some form. The goal is to create grid parity, which means that wind and solar energy would be competitive with other fuels without federal help. By all accounts, prices tied to solar panels and wind turbines are dramatically falling.

As such, wind and solar production increased by 16 percent and 49 percent in 2012, respectively, says the Lawrence Livermore National Lab. Still, the two fuel sources as a percentage of the overall energy mix in the United States only account for 4 percent of all energy produced, with future projections varying.

The huge fight over the production tax credits awarded to wind and solar producers during the last budget battle does not portend well for their ongoing continuance here. The same resistance is now happening in Europe with respect to the allowances that they offer. But, the global outlays have helped bring down the price of the underlying technologies that may ultimately make those green energies more competitive.

Twitter: @Ken_Silverstein

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This keeps coming up

To argue that solar is cost competitive and a long term solution is silly. Solar is good for fuel source diversification, but it is as reliable as the the weatherman without storage  Cost, solar is multiples of upfront capex and it gets solar recs that are 4-6 times the cost of power in states likes MA.  It has a lackluster capacity factor.  Add up all the power revenue, tax subsidies, the SRECs, the cost to build and operate and divide by the power ouput on a MWh basis and compare that to other resources.  Its not close.  It isn't.  I don't get how the arguement keeps coming up.  Its expensive, intermittent and recquires baseload back up.  Yes it will get cheaper and maybe one day energy storage may compliment it.  If you want to pay more for solar energy fine, but do so because it is YOUR position that it benefits out weight the costs and that maybe by investing today you will gain much more value in the future somehow.  It's fun, its advanced, its "clean" and your are doing good.  But it is expensive and currenlty needs baseload to cupport it.  That's it.  If you are a fan of roof top solar and you don't think you should be charged by the utility for any services potentially provided by the utility, then cut the cord and let's see how you do literally on your own; otherwise, pay a fee for whatever you want to call it like: energy insurance, standby power, back-up power, oh-oh power, my contractor stinks get the point. 

valid points but....

... your position does not take into consideration the environmental and health impacts of burning fossil fuels. 

Yes, solar and wind are not very reliable, but they help clean the air.  And unlike the biblical view that the earth and the environment is ours to take advantage of, there is a cost that currently is not incorporated into the price of fossil fueled electricity.  In other words, by sacrificing our environmental and physical health, we heavily subsidize fossil fuels. (No, I am not a tree hugger -- just an economist).  So, why not provide subsidies to clean energy technologies?

To those who do not value clean air, water, etc., your points are brilliant.  But unless we support these clean energy techologies now, the time may come that we find ourselves left behind and in need of way heftier subsidies in order to deal with the environmental and health costs of burning oil & coal.

-- ADThanos

German & US differences in renewables, the common problem of CO2

There is little prospect of Germany's solar revolution being implemented with equal fervor in the United States. Germany has a single national feed-in law, while American utility companies and homeowners' associations can limit or prevent residential deployment. Dedicating 100 square feet of solar panels also requires an equivalent area of paperwork. The German plug-and-play procedure, by contrast, enables anyone to provide rooftop solar power to the grid within days of calling the installer. 

Amory Lovins' assumption that renewables in Germany "work just fine" throughout the year is not always confirmed by experience. Grid stability is easily attained when availability exceeds demand, since individual generators then only need to suspend operations temporarily. Yet this is an expensive practice, since compensation must be paid to wind farms that are disconnected under oversupply conditions. During dark windless months, on the other hand, German renewables fail the test of grid security. In February 2012, they provided only a miniscule fraction of nameplate capacity, necessitating mothballed coal power plants to be reactivated for filling the supply gap.

Solar irradiation cannot be linearly extrapolated to the progress of global warming. However, a high school education is adequate for understanding the CO2-induced decline of ocean pH levels. Unless the coal industry has found a way to prevent the destruction of marine food chains in oceans acidified by power plant emissions, it will be necessary to provide a substitute source of protein to 30% of the world's population, possibly by mid-century.

Interesting piece

A few months ago, a Siemens report suggested that the way renewables have been deployed in Europe is wrong.  Since Germany has been mentioned, the Siemens report stated that (and I am paraphrasing here) it is foolish to deploy solar in Germany and wind in Southern Europe. 

The price of electricity today, although it should, does not take into account environmental and health costs -- costs that are reduced with renewables. In other words, it is my belief that if renewables end-up also pushing costs into the future it is OK because future consumers will reap the benefits of the technology.

Subsidies for renewables, therefore, make perfect sense as investment in the economic and health future of any country/continent.  Of course interests (I sat in a presentation in Denver, CO last month where the presenter -- some PhD with obvious financial interests -- was arguing that there is no proof of global warming and that the current climate change could just be a normal phase that we are going through!!!) would have you believe otherwise, but a state/country/continent would be foolish not to invest heavily in renewables.

Thank you for the summary.

-- ADThanos

Incentives dispersion.

First of all, why continuing to give for granted expression and theories that have nothing to do with the science?

The reference is to the expression: "... greenhouse gas emissions tied (???) to global warming.". Global Warming is due to factors outside the Planet and continuing to confuse people on the AGW is only a very negative spoiling of resources. 


Also this reference is just creating a false expectation: " ...In May 2012, Germany made headlines when at one defined point it generated 22,000 megawatts from solar power, which is roughly half of the country’s electricity needs."

It was probably a week end day of clear sky, impossible to predict and guaranty it might happen again the following Monday.

Anyway, notwithstanding Germany is the country that invested a lot in Solar PV systems, it still receive back a contribution of costly enlectricity for abt. 4% of its yearly need.

When talking of subsidies, it is worth mentioning the incredible "record" achieved in Italy, the second largest investor in those items. In just few years Italy has been able to commit somithing like 180 billion Euros to subvent the installation of Solar PV systems, ALL charged through the electricity Bill to the final consumers! The cost has become so huge (for a country that is living in recession since 5 years now), that it is negatively influencing the capability of its industry to compete with their competitors abroad (Germany, France, U.K., etc.), to the detriment of the same people financing the "deal" !!!

Last year about 12,5 billion Euros have been charged to the consumers Bill and that will be granted (to the intellingent investors) for the following 20 years. A very clever support to the country's industry need to compete  worldwhile.

By consequence (not only due to the above, but also due to the wrong "Fuel Mix" used in the country to produce electricity - mainly from Gas, 92% imported !!!) the cost of electricity in Italy is the higher in Europe: about 35% higher than the Ue28 average. Really fantastic and the country is also the larger importer of electricity in Europe (abt. 15% of its needs), coming from the neighbouring countries France, Switzerland and Slovenja, produced there mainly from Nuclear, banned in Italy instead.

So, I would suggest you examine the silly italian system if the purpose is to alert people to avoid a similar negative outcome.