PV increases bills
Electricity prices in many parts of the world are increasing. Often on the back of these increases, renewable energy is seen as the main culprit. But is this really the case?
In Germany, the Renewable Energy Act (EEG) is the legislative mechanism by which solar subsidies have been put in place. Each household pays an additional amount as a percentage of its total bill, which in turn pays for the renewable energy program. In the 2012 EEG amendment, it is estimated that German households will pay 3.6 euro cents per kWh in 2012, which is expected amount to €17.6 billion (US$23.11).
It’s certainly true that this is a serious amount of money, but it’s worth asking, where is the money going? A report late last year from Germany’s Renewable Energy Agency has shown that "private individual / households" own 40 percent of green power generating projects. That means either PV on household roofs, or shares in solar, wind and biomass projects. "Farmers" also make up 11 percent with "businesses" – office and retail business owners – taking nine percent. That means 75 percent of all FITs go to regular utility-rate payers, homes, farms and small businesses, not the big utilities.
So while households pay for the EEG, much of it flows directly back into the community. In fact, the big four utilities – a RWE, Eon, EnBW, and Vattenfall – only wind up receiving 6.5 percent of all FITs. So PV isn’t lining the pockets of big businesses at the expense of ordinary consumers. Noteworthy is also that big power consumers, largely manufacturers and export-focused wealth creators, are exempt from EEG payments.
It’s additionally becoming clear, as more PV gets installed in various markets, that PV itself is bringing down the cost of power. Known as the "merit order effect", it means that during days with plenty of sunshine, the spikes in demand, which can drive up peak electricity prices, are being smoothed out by PV electricity flowing onto the grid. A recent study produced by Germany’s Institute for Future Energy Systems (IZES) found that solar power has reduced the price of electricity on the European Energy Exchange in Leipzig by 10 percent, on average. In the early afternoon, when PV is running at full power, this reduction is up to 40 percent.
This smoothing out of electricity prices is even more pronounced in warmer countries, where electricity demand peaks when the sun is out. In Australia, the Melbourne Energy Institute published a report that showed the merit-order effect kicking in and the kind of savings it can deliver, if utilities pass on the benefits. The report highlighted that on January 29, 2009, demand for electricity spiked due to air conditioners and fans being turned on. The demand pushed peak load prices to a record high of AU$10,000/MWh (US$10,375/MWh), which resulted in earnings for the utility of AU$550 million. That’s a lot of money being paid for by consumers.
Mike Sandiford, Director of the Melbourne Energy Institute, constructed a model, which showed that feeding five MW of PV into the grid at that time, would’ve resulted in a fall in peak prices. They would’ve increased, but would not have gone above AU$300/MWh (US$311/MWh). In total, PV would’ve saved householders in the Australian city AU$210 million (US$218/MWh), on one day!
Be a solar superhero and share this myth busting infographic, which will set the solar story straight! Download to save and share among your family, friends and social networks.