Germany: New proposals for solar subsidies

18. January 2012 | Markets & Trends, Global PV markets | By:  Sandra Enkhardt/Alan Faulcon

As installed photovoltaic capacity for the fourth quarter, 2011, surprises many, pv magazine speaks with consumer protection expert, Holger Krawinkel, the Head of Building, Energy and the Environment at the Federation of German Consumer Organizations (vzbv).

A solar PV park in Germany.

With dramatic cuts to FITs in Germany, Krawinkel argues that arguments that photovoltaics are too expensive will become effectively countered. Image: Phoenix Solar AG.

If feed-in tariffs (FITs) drop even faster than provided for in the Renewable Energy Act up to now, Krawinkel then advocates that the argument for new photovoltaic installations is actually strenghtened.

pv magazine (pvm): How do you envision further subsidies for solar electricity?

Holger Krawinkel (HK): As far as photovoltaics is concerned, the reductions that were planned with the flexible ceiling were not carried out in midyear 2011–as a result of the time allotted for the construction of new installations. These would also have been higher in January as well, if the entire quantity for 2011 had been used as a basis.

What we would like to see is that the reductions, which did not take place, despite new installations of more than 3500 MW in 2011 and 2012, be carried out with immediate effect. Then the reduction would be accelerated by at least one year and would mean feed-in tariffs (FITs) of approximately 0.15 euros per kilowatt-hour (/kWh) for photovoltaic roof installations and 0.10 euros /kWh for ground-mounted systems.

pvm: And this we would achieve in principle, if things continue with the installation of new output on a similar scale?

HK: These values would be reached by July 1, 2013 or January 1, 2014 at the latest, if new output were installed at the same pace as in the past.

pvm: When should this accelerated reduction take place in your opinion?

HK: It should take place as soon as possible, in the period between January 1 and July 1, 2012.

pvm: And why is it not possible to wait? That would only be about another year. What in your opinion is the risk if reductions are not carried out earlier?

HK: By distributing the installation of new output of 7,500 MW in the past year and failing to carry out any reduction at midyear, approximately 5,000 MW were installed for about three cents more, in terms of remuneration guaranteed for over 20 years. The costs from last year alone will probably amount to roughly 150 million euros.

If this figure is projected over 20 years, then this amounts to up to three billion euros. Furthermore, the Renewable Energy Act provides for remuneration that covers the respective costs. Policymakers committed themselves on this issue. It has to follow the development in costs for the respective investor. That is why I see this suggestion as a matter of course.

pvm: And you do not think that with a further reduction of between 27 and 30 percent that there will be the danger that investors will be robbed of any security and then no new photovoltaic systems will be built?

HK: This is a discussion that we have every six months. As a result there is more and more new output installed than claimed or feared. There is something ritualistic about this debate because the investors are not nervous by any means. That would really surprise me because in contrast to all of the other renewable energies–and this is something that we can be proud of–the costs have actually been dramatically reduced.

pvm: But costs will also hit bottom in the foreseeable future. So in the years to come things will not continue at the pace of the last two years. Or do you believe otherwise?

HK: We still have approximately 100 percent in supply overcapacity, roughly 50 gigawatt (GW) of production capacity compared with approximately 25 GW, in terms of demand. And this is a market situation that can be used. Things will not become more expensive, on the contrary–price reductions can still be expected as a result of technical innovation–which is why we haven’t reached the bottom.

Nevertheless the pace of reductions does not have to be maintained automatically if FITs of 10 or 15 cents /kWh have been achieved. What matters is that the subsidies be adjusted to the cost curve. There is still a big gap because the costs decline faster than stipulated with the flexible ceiling prescribed by the policymakers. Here photovoltaics represent a unique case.

pvm: What would your proposals mean for the public discussion about solar subsidies?

HK: I would like to change the tone of the discussion about solar subsidies so that there is not always the impression that a criminal court aims to finish off the poor old photovoltaic industry. Unfortunately the industry has not managed to go into the offensive up to now. It should say: “Yes, we are ready, 10 or 15 cents /kWh is now enough to build plants.” At 10 cents /kWh for ground-mounted plants, photovoltaic technology approaches land-based wind power plants. This in my judgment would end the discussion about driving up the costs.

pvm: Has your proposal received any positive response from the solar industry?

HK: I have received different responses. There are some who say that the debate is only relevant for one more year. However, we say that it is now possible and it must be one year less. Others in the solar industry clearly state that we can do it now and we will take the offensive. This is the attitude that I would like to see among all of the other participants as well.

pvm: What do you see as the danger if this reduction is not implemented as quickly, and if we actually wait until the FITs have reached the level prescribed by the Renewable Energy Act?

HK: Then the medium-term forecast of the transmission systems operators would be realized: Their upper scenario provides for the installation of new output amounting to between seven and eight thousand MW of photovoltaic power per year. We would then have approximately 60,000 MW in the year 2016 and the Renewable Energy Act reallocation would be about one cent higher /kWh. This also corresponds to the figures from the German Solar Industry Association, which anticipates costs of 0.035 cents for each gigawatt of newly installed output. Installation of new output of 30 GW would then be equivalent to just this one cent more /kWh when it comes to the Renewable Energy Act reallocation.

This will determine the debate in the upcoming days and weeks. However, this can be avoided. With a faster reduction of the FIT, 60 GW could also be achieved with a clearly lower increase in the Renewable Energy Act reallocation.

pvm: Do you advocate a ceiling?

HK: No, I do not believe that a ceiling is required for the Renewable Energy Act. With 10 cents /kWh for ground-mounted installations, this comes close to land-based wind energy. There a ceiling would have to be demanded with the same argument. And that is nonsense. On the contrary: At these costs I am very much for the construction of new installations.

pvm: But the space for outdoor installations in Germany is limited.

HK: That is true for all technologies. And that is why I endorse removing the restrictions for ground-mounted installations from the Renewable Energy Act again. It has no place in a law on subsidies, but rather should be decided in the regions and municipalities. They should use their regional or development planning in order to determine whether they want to have outdoor installations or not.

pvm: And then new questions will surely arise?

HK: Of course there will be other questions to answer that are more crucial than arguing about how inexpensive solar electricity has already actually become. For example, it is much more important to ask how and where 60,000 MW of photovoltaic electricity can be reasonably integrated into the electricity grid and at what costs.

pvm: In the final analysis there is then the question about network expansion and distribution of newly installed systems. So wouldn’t it perhaps make sense to induce the construction of plants on a regionally differentiated basis? Or is that too much interference again in your view?

HK: The connection between the distribution of future production and the associated network expansion required, to this end, is a central question. It also applies to wind energy: Where and how much should be built: In the south, in the north, on the ocean? Development of the transmission network is already a problem even at this point. A lot speaks for cooperation between the federal states on this issue and specifying regional corridors for the production of solar and wind energy. The various federal states have already announced target values, but there is still no binding specification of areas that are available for the development of renewable energies and coordination with any possibly required development of the distribution networks.

pvm: Let’s come back again to another point. In the public discussion, photovoltaic energy is frequently represented as expensive. Do you think that an end can then be put to this discussion with your proposal?

HK: Yes, I think that the cost argument will then no longer hold water. For me the discussion ends with a FIT of 10 cents for ground-mounted installations. One-cent difference compared to land-based wind power is unproblematic. In addition, the reduction of costs will not stop with 10 cents /kWh, but it will take place at a slower pace. Without a debate on costs, it becomes possible to focus on other important questions. And those politicians who today still demand a ceiling and are critical toward the change in energy policy in any case, will have to position themselves completely differently.

pvm: Because they ultimately will not have any other arguments if one heeds your proposal?

HK: Precisely, the cost argument is then superfluous.

pvm: Are there any other points of criticism that you have with regard to the Renewable Energy Act?

HK: We have several points of criticism when it comes to the Renewable Energy Act. These have to do in particular with costs that have little to do with renewable energies; for example, management bonuses. We criticized this from the very outset, and naturally insufficient participation on the part of the industry as far as the Renewable Energy Act reallocation is concerned.

At such market prices the industry should at least make a contribution toward reallocation within the scope of the merit order effect for renewable energies. This would relieve the other consumers. Otherwise I think that excessive demands will be placed on offshore wind energy. If, for example, you compare that with what is paid in Denmark, then remunerations are approximately 30 percent too high.


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