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The Affordable Cost of German Solar?

image credit: German solar farm

The German solar industry has been very successful in driving high solar penetration rates for the country as it leads the world with 32% of the country’s electricity consumption produced by solar in 2016. This energy transition to renewables is called Energiewende.

Some German farms produce solar energy at high, 20-year guaranteed feed-in tariffs that bring in 40% of the earnings from the farm’s operation.

Is the German solar industry a model for the rest of the world to follow, both technically and financially?

Graph 1: Germany’s Energy Mix In kWh Per Year

Technically, the transformation of the German energy industry has been impressive, however, Germany spent 25 billion euros ($26 billion) on renewable energy in 2016, most of which, 23 billion euros, consumers paid through a surcharge on their electricity bills.

 

The solar surcharge was the biggest reason that the amount the average German household spent on electricity rose to 1,060 euros in 2016 ($1,102), up 50% from 2007. That was an annual compounded increase of 4.6%. Over the same period of time, the U.S. electricity price rose 1.3%, or only 28% of the German electricity price increase.

Germany has become the world’s largest solar market, however its sunniest areas receive only as much sunshine as Seattle, Washington, while Berlin sits at roughly the same latitude as Calgary.

The same “duck curve” phenomena that has occurred in California in the U.S. has occurred in Germany, (see my May 2017 post, “Grid Reliability With Increased Renewable Energy”). With decreasing solar energy prices and increasing solar supply due to the feed-in tariffs, wholesale German energy prices have dropped forcing many gas-fired and nuclear plants into uneconomic operational modes.

Germany’s carbon dioxide emissions have dropped 27% below 1990 levels from 1,248 million metric tons to 908 in 2015 as shown in Graph 2.

Graph 2: Germany’s Greenhouse Emissions

 

While the emissions record has been impressive up to 2015, Germany may have a very difficult challenge in meeting the target of 40% below 1990 levels by 2020. As German solar subsidies and surcharges have produced more solar energy, low prices for German coal and low wholesale energy prices have encouraged the power generators there to use more native lignite.

As more solar energy enters the grid, the transmission companies must accept the supply and upgrade the grid at ratepayer expense. In 2015, one transmission company, 50Hertz, spent 351 million euros on grid upgrades.

Germany coughs out just 2% of global carbon emissions, slightly more than Iran. China emits 24%, and the U.S., 13%.

Copyright © March 2020 Ronald L. Miller All Rights Reserved                                                  

Ron Miller's picture

Thank Ron for the Post!

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Discussions

Matt Chester's picture
Matt Chester on Apr 1, 2020 4:31 pm GMT

The low cost solar is surely a good thing, but I know that many people (in Germany and elsewhere) have had less than stellar things to say about Energiewende overall. Are there ways to replicate the success in low solar costs without bringing out the pain points that have struck Germany elsewhere in its energy transition?

Ron Miller's picture
Ron Miller on Apr 5, 2020 5:23 pm GMT

Matt, there can be lessons learned from actual experience in solar and other areas of the energy sector. In Germany, the program had a very fast-paced roll-out of PV, with very high feed-in tariffs that were over-subscribed. German systems less than 500 kw represented 66.5% of total installed capacity, whereas in the US, larger, utility-scale systems over 1 MW were more prominent, thus allowing greater economies of scale and lower prices.

Ron Miller's picture
Ron Miller on Apr 8, 2020 3:24 pm GMT

Matt, some additional information for the share of utility-scale solar installs in the US. Per the Solar Energy Industries Association, in 2019 utility-scale solar installations were 45,765 MW or 60% of total; non-residential 14,385 MW or 19% of total; residential 15,850 MW or 21% of total. https://www.seia.org/solar-industry-research-data

Matt Chester's picture
Matt Chester on Apr 8, 2020 4:11 pm GMT

Thanks for the follow up, Ron!

Mark Silverstone's picture
Mark Silverstone on Apr 6, 2020 4:06 pm GMT

I find this astonishing, i.e. that they could achieve such reductions in GHG emissions.  It makes me want to know what has happened since 2016. Further emissions reductions? More natural gas use? Less nuclear?

Ron Miller's picture
Ron Miller on Apr 6, 2020 5:01 pm GMT

Mark, the 2018 emissions was 866 million metric tonnes in Germany down 30.6% from 1990 levels of 1,248 million metric tonnes. The use of renewables reduced emissions by 38 million tonnes, as did the exceptionally warm weather over that winter. Additionally, improvements from phasing out coal and carbon trading had an effect.

Mark Silverstone's picture
Mark Silverstone on Apr 8, 2020 4:26 pm GMT

Thanks Ron. It looks like 866 is pretty close to the projection in graph 2.

Ron Miller's picture
Ron Miller on Apr 9, 2020 4:42 pm GMT

Yes. Thank you Mark for your continued interest!

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