Germany may have flown dangerously close to the sun when providing overly generous feed-in tariffs (FITs) for solar PV. But those incentives can be credited with helping the country achieve a significant milestone on the way to its ambitious goal of reducing carbon emissions by up to 95 percent by the year 2050.
A survey released last week by the Federal Association of the Energy and Water Industry (BDEW) found that Germany produced a record-setting 28.5 percent of its energy in the first half of 2014 from renewable sources, with solar and wind representing the biggest growth areas. Photovoltaic (PV) power generation grew by 27.3 percent to 18.3 billion kilowatt-hours, while wind increased by 21.4 percent to 31 billion kilowatt-hours.
Continued expansion of PV installations, combined with favorable weather conditions in the first half of the year, contributed significantly to the increases. According to PV Magazine, BDEW cautioned against expectations that the growth rate would be sustained through the remainder of 2014.
The paradoxical success of the Energiewende, which has carried high costs in the short term, means that countries with similar renewable energy aims should be aware of Germany's experience. But they certainly shouldn't dismiss it altogether.
Skeptics of the Energiewende have accused its solar support program of being too costly, pointing to Germany's retail electricity tariffs, which a recent EI New Energy report ranked behind Denmark as the second highest among industrialized countries.
As Greentech Media previously reported, a key component of the Merkel administration's renewable energy law, Erneure-Energien-Gesetz (EEG), is the requirement that transmission system operators purchase solar energy generated by both small and utility-scale PV installations at a twenty-year fixed price. The operators in turn sell the power to the wholesale market at cost, which fluctuates but is invariably lower than the FITs paid to renewable energy producers.
The gap is closed by a surcharge, the EEG-Umlage, which is collected from retail customers via their electricity bills. The combination of falling electricity prices, an unanticipated surge in PV installations and EEG-Umlage exemptions granted to industrial, “trade-exposed” electricity users has led to heavy surcharges for the average customer.
But despite the often dismal picture portrayed in the international media -- a Sept. 2013 New York Times article, for instance, presented German citizens living in near-darkness in a desperate attempt to offset staggering electricity costs -- Germany's experience, and the EEG reforms that have prevented costs from imploding the renewables program, provide a handy template that could help guide energy reform policies in the United States.
The Solar Energy Industries Association (SEIA) closely examined Germany's solar support programs and found that “by and large, the German path has been remarkably successful, given the goal…of 'de-fossilizing' Germany's electricity sector.”
The study, released in late July, concluded that the U.S. should view Germany's EEG reform efforts “not as an acknowledgement of a broad failure of the Germany system of FITs,” but as an “opportunity to 'look ahead' and see how electricity systems and the rules governing them will have to adapt when penetration rates of various renewable energy sources reach levels similar to those in Germany.”
A similar program in the U.S., the report suggested, might incorporate automatic adjustments to incentives that can respond to higher-than-expected installation rates and adjust to decreases in system costs.
The report also challenged the importance of providing surcharge exemptions to German industrial users, pointing out that these exemptions have translated to electricity costs that are the same or lower than European competitors, which undermines the rationale for providing the exemptions in the first place.
Further, “heavy electricity users also benefit from the decreasing prices on wholesale markets, caused primarily by solar and other renewable energy production and hence a direct by-product of the renewable support program.”
The report authors also said it is “misleading” to blame Germany's high residential electricity prices entirely on the solar support program: “While the renewables levy…represents a significant portion of [retail electricity] rates,” the authors wrote, “other elements such as taxes and fees are of comparable magnitude and have increased at similar rates.”
Christoph Podewils, director of communications at the renewable energy think tank Agora Energiewende, said that he and his colleagues “generally” agreed with SEIA's conclusions. He pointed to the heavy decreases in the cost of electricity over the last five years in Germany, which he said reflect the significant cost decreases in PV technology.
“For the regulator, it is important to keep an eye on that and to adjust cost from time to time,” he said. “In Germany, the mistake was to wait too long to make these adjustments.”