Surprise, Surprise: German Solar Stutters Once Subsidies Dry Up

  • Date: 02/05/14
  • Walter Russell Mead, The American interest

As part of its energiewende, Germany guaranteed solar energy producers long-term above-market rates for their energy contributions. It worked like gangbusters, transforming Germany into the world’s leader in solar energy, but the subsidies necessary to keep the boom going came with heavy costs. Recently, Berlin has walked back its over-generous feed-in tariffs, as the subsidies are called. Now, as Reuters reports, new solar installations are plummeting:

Lower subsidies in Germany cut the installation of solar panels sharply in the first quarter, data from its energy regulator showed on Wednesday…”This development is mainly due to the steady decrease in subsidies,” said the Bonn-based Bundesnetzagentur (BnetzA). [...]

Additions already last year had halved over 2012 to 3.3 GW…The government over the past two years introduced curbs to feed-in tariffs, as they contributed to sharply higher power prices for consumers who share the subsidy bill.

This isn’t the sign of a healthy industry, and it should tell Germany’s policymakers that reducing these feed-in tariffs was the right choice. Clearly, as an energy source, solar can’t compete on price with its browner, non-renewable alternatives.

Greens around the world have held up Germany’s recent solar “boom” as evidence that renewables can play a larger in national energy mixes, if only policymakers would get on board. But Berlin’s experience tells a different story. Paying producers exorbitant amounts of money will kick things off, but the costs of those subsidies are ultimately borne by consumers: Germany pays among the highest prices for electricity in Europe.

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