Report: PV hits profits margins and sales of central German power generators


"Decreasing costs of installing photovoltaic systems in Germany are leading to negative effects on margins and sold electricity volumes of the large central generators," stated the report published by Renewable Analytics LLC, a U.S.-based research and consulting firm specialized in the photovoltaic industry.

The report, "The effects of photovoltaic electricity generation on the German wholesale power prices," suggests that conventional power generation business models are being threatened by an increase in photovoltaics. This has consequently led the generators to push back by lobbying against decentralized renewable generation.

PV cuts electricity prices

As well as suggesting that the conventional, centralized generators are worried by the rise of cheaper, decentralized photovoltaic generators, Renewable Analytics said wholesale electricity costs in Germany were significantly lower. The report said the cost in 2012 was €6.145 billion less than in 2008, and that this was due to increased PV generation.

Electricity prices in 2012 showed a bigger drop during sunnier months – and during the daytime. Those months with less sun saw a drop independent of day or night. In January 2013, just 0.83% of the monthly power production came from solar power, while in May of 2012, it was 12.35%.

Meanwhile, on any given day in 2012, German spot market prices plummeted when the sun came out, and remained low until the sun set. Yet back in 2008, prices spiked during the day as demand peaked.

"Savings per month between 2012 and 2008 continued to drop during the winter months, completing the rough trend for year of highest savings during the sunnier months," said the report.

The report added that the spread of solar power during 2012 had drastically reduced German spot market electricity pricing – and that this would continue if the current market framework remains unaltered.

Another significant observation made by the analysts is the growth of decentralized systems of solar electricity in comparison to centrally produced electricity. In consequence, during summer months, centralized power producers are experiencing lower levels of capacity utilization. Yet they react to this by increasing commercial and residential electricity rates, thus increasing the appeal of decentralized photovoltaic installations.

Levy restructuring

Renewable Analytics also produced a proposal of how to restructure Germany's renewable energy law (EEG) levy. It took 2008 as a base year, due to the fact it was before the financial crisis hit energy consumption, as well as being before renewables went large-scale in Germany.

The idea is to only change the levy, "if there is a change compared to the reference year 2008 that is solely attributable to renewable energy generation capacities," states Renewable Analytics.

The EEG levy is the difference between the feed-in tariff payments made to renewable energies under the Germany's renewable energy law, and the price that is paid to the electricity generated by these systems to the transmissions system operators when selling it on the wholesale power market.

The report said the levy rose to €0.0528/kWh in 2013 for non-privileged end customers (including all residential households in Germany), and this led to significant higher energy costs.

The proposal suggested: "The remaining difference between the feed-in tariff payments under the EEG and the price of that electricity on the wholesale power market should be financed from the budget of the Ministry of Economics or other tax revenues because the remainder is not attributable to renewable energies but can be seen as an industrial subsidy."

There should also be an adjustment to take into account the costs for conventional generation such as price volatility of coal, oil and natural gas for thermal power generation, the proposal said.

Edited by Becky Beetz.

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