Commonly Perceived Truth #2: No Sun, No Solar

Solar Power is defined as: energy from the sun that is converted into thermal or electrical energy. It would thus stand to reason that you need lots of sun to get lots of solar power, right? Not necessarily.

Check out this news from Germany:

New data shows that Germany has become the world’s leader for generating solar power, despite the fact that two-thirds of the country’s annual daylight hours are spent with heavy cloud cover.

Germany produces 55 per cent of the world’s photovoltaic (PV) energy, using solar panels along the country. So far, solar power generates just 3% of Germany’s total energy, but the government hopes to raise that to 27% by 2020.

A law was passed in Germany in 2000 that offers huge incentives for companies to invest in solar power. The law, known as EEG, planned 100,000 PV panels across the country. The figure, however, currently stands at 300,000 panels.

No Sun, No Solar. No Sun, No Problem. In this case, subsidies are more vital than the natural resource (sun) itself.

But these subsidieds must have cost the German government a fortune, right? Let's take a look at the economics. This story explains:

At the heart of the scheme is a "feed-in tariff" giving anyone who generates power from solar PV, wind or hydro a guaranteed payment from the local power company. The power firms are obliged to buy solar electricity for 49 cents per kilowatt hour - or nearly four times market rates.

This can work out at a better return than putting money in the bank. So despite the cloudy weather, the investment pays for itself within 10 years.

So its the local power companies that are paying for the solar boom, not the government. What do they have to say about being legally required to buy energy at four times market rates? Do they recover those cost?

Here is a bit on how those concerns resolved:

Germany’s major conventional power producers, including RWE, E.On, and Vattenfall have also complained about the EEG mandate to purchase renewable energy at fixed prices. For obvious reasons, conventional power producers object to the government’s favorably discriminatory treatment of renewable energy producers who would otherwise not be capable of competing in the marketplace. German power companies brought their complaint unsuccessfully to the European Court, where they argued that Germany’s EEG provision violates EU legislation regarding government assistance to domestic industries.⁴⁵

Nonetheless, conventional utilities and energy marketers have learned to profit from EEG mandates. Since wind and solar generators produce power mainly during daylight hours, power marketers usually buy renewable energy during the day at stipulated fixed costs and sell it to consumers at even higher rates, especially during peak daytime periods. Cheaper, conventionally-generated power is purchased in larger quantity at night, when demand and tariffs are significantly lower. In 2003, a German energy industry association estimated annual profits from renewable electricity trading at approximately 25 million Euros.

Very interesting. There's, of course, much more to report. For example, Mitochondriac was glad to see that the renewable energy market was producing many German jobs, but disappointed to learn that their demand for photovoltaics (solar panels) has driven the cost of those resources sky high, further stifling solar growth in the U.S. For more detail on some of these issues, this is a good article. Otherwise, Mitochondriac's faithful readers can look forward to more coverage of these issues.

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