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chart on solar cost reductions over several decades
Dollars per watt for solar energy (Scientific American)
If you follow the critics about such matters, you've probably heard that Germany's long-term investment in solar power has failed. There are, of course, some corporations that would like that to be true. But it isn't. Far from it. In May, the nation's distributed solar installations—more than a million of them, a large proportion on residential rooftops—generated 10 percent of Germany's electricity for the month. On May 25-26, solar generated half Germany's midday electricity production, pumping out 22 gigawatts of electricity.

Before someone jumps on me for concluding that every month, rain or shine, 10 percent of the total electricity can be generated in Germany with its existing solar installations, or that 22 solar gigawatts can be generated 24 hours a day, seven days a week, that's not what I'm saying. May happened to be an especially sunny month. Night obviously puts a crimp on solar generation. That nation actually generates about 4 percent of its annual electricity from solar sources.

But what can be concluded is that government policy tied to a reasonable subsidy can make a diverse basket of renewable energy sources a practical means of weaning nations off fossil fuels and, the Germans propose, off nuclear energy as well.  Generating power from solar installations in the day and from wind turbines at night, plus using biomass, geothermal and other renewables, makes for a sustainable system. Germany is already generating 20 percent of its electricity from renewables—solar, water and wind—the greatest fraction from the latter. A dozen years ago, the total was just 6.3 percent. Where's the failure?

Germany's long-term plan? One hundred percent renewable electricity by 2050. That is not a typo. Germany's goal ought to be a global goal.

Cleanly generated electricity is just half the goal. Cutting carbon emissions 80 percent by 2050 is the other half.

The argument against such a project is that the cost of renewable electricity is too great. That if it were really practical it wouldn't have to be subsidized. This ignores the fact that ALL sources of electricity are subsidized and have been from their inception. It also ignores the fact that, for some locations, the unit cost of power generated by new, conventionally fired power plants, measured by the "levelized cost of electricity," is now higher than the unit cost of electricity for wind and solar. Within just a few years, according to a wide range of experts, wind and solar will have reached parity with other sources of power and no longer need subsidies.

In Germany, the 21-year-old subsidy in place for solar and wind (geothermal, biomass and hydropower) is called the "feed in tariff." That pays "microgenerators"—including people with residential solar installations—a few cents for each kilowatt-hour of electricity they generate whether they use it themselves or transmit the surplus to a utility. For example, systems capable of generating less than 10 kilowatts now receive €0.195/kWh. Bigger systems receive smaller subsidies. Over time, the government reduces the amount of the subsidy for newly installed systems while maintaining the old rate for systems already built.

Bjorn Lomborg and some other critics have called the subsidy a disaster because, they say, it hasn't generated a significant amount of electricity, hasn't cut greenhouse gas emissions and at the same time has cost Germany a fortune.

The critics are wrong. What the feed in tariff has done is exactly what it was supposed to do: boost installations of renewable power sources and, over time, lower their costs. In fact, it has been so successful that last year Germany added more than twice the new solar capacity that the government anticipated. As a consequence of that and utility company pressure, the feed in tariff is being sharply cut to reduce the number of new installations in 2012. But, at least one industry official believes Germany will add even more solar installations this year than last. That's in part because companies want to beat the deadline for when the tariff will drop. But it's also because production costs of solar systems, skewed in part by cheap Chinese modules, have plunged faster than the cuts in the tariff.

Meanwhile, because distributed solar is now providing a large fraction of Germany's power in the peak hours when it is most needed, the wholesale price of electricity has fallen. That worries fossil-fuel generators. The bulk of their profit margin comes in those peak hours. Deutsche Bank solar analyst Vishal Shah said in a report in February that solar installations were cutting peak electricity prices by up to 40 percent. Thus, the pressure from utilities on the government to cut back the feed-in-tariff is enormous.

At the federal level in the United States, the closest thing we have to a feed in tariff is the production tax credit. That provides a 2.1-cent/kilowatt-hour subsidy for the first 10 years of a renewable generator's production whether it's from solar, geothermal or wind sources. The PTC's greatest impact has been on wind generators. The credit has helped to reduce significantly the cost of generating electricity by wind turbines over the past two decades and spurred developers to install 48,611 megawatts of wind generating capacity. That's about 5 percent of the total generation capacity from all sources and growing rapidly. Over the past five years, 35 percent of total new U.S. generating capacity has come from wind.

But the production tax credit expires December 31. Thanks to partisan gridlock in Congress, there is about zero and a half chance it will be renewed before then. Even those Republicans who support the growing U.S. wind industry, now at more than 470 manufacturing facilities nationwide, will not do anything to give Democrats any legislative success before November. Even GOP bad boy Karl Rove thinks letting the PTC expire is a bad idea. Since a typical wind project takes about 18 months to complete, the expiration deadline is pushing wind farm investors to withdraw from the market now.

Whether we have a feed in tariff—the best solution—or a reasonable extension of the production tax credit—say, five to eight years—what the United States really needs is a comprehensive energy plan. That's what Germany has. What Denmark has. What China has. Leaders of those and other countries, including conservative leaders, set policies that bolster renewable installations while too many of ours stand around twiddling their thumbs.

 

Originally posted to Meteor Blades on Tue Jun 12, 2012 at 07:09 PM PDT.

Also republished by DK GreenRoots, Nuclear Free DK, and Kosowatt.

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