A Year-End Look at the German Solar Industry

The Los Angeles Times makes a case for country-wide government solar incentives in its article “Germany shows government role is key to thriving solar industry,” which takes a brief look at the country’s solar incentives and compares them to the state-specific, localized incentives found in the United States. Although Germany doesn’t receive as much sun as places like Spain or Hawaii do, solar advocates say that the country’s thriving solar industry is a testament to the success of its national incentives.

What you do need, energy experts say, is a national government willing to foster the development of renewable energy. Leaving it purely to market forces — or piecemeal local incentives, as in the U.S. — doesn’t work as well.

A renewable energy law passed in 2000 mandated that utility companies had to purchase energy from solar plants at higher rates and to pump this energy into their grids, which added roughly an average of $5 to the energy bill of each household per month. This feed-in tariff has the potential to provide solar plants financial returns of 15% per year, a staggering return that has contributed to the exponential growth of a sector that employs roughly 50,000 people in Germany.

Energy harvested from the sun now accounts for 1% of Germany’s power supply. Although that still lags behind wind and hydroelectric projects, optimists say the amount could climb to 7% by the end of the next decade. By contrast, coal- and gas-fired plants currently provide more than half of Germany’s energy and nuclear power stations with more than 20%.
“It took some time. In Germany, we had no history of PV for a long, long time. But now Germany is a more mature market” than the U.S., said Markus A.W. Hoehner of EuPD Research, a consultancy based in Bonn.

“The major difference is that the U.S. market has no feed-in tariff. You have more than 800 combinations of incentives in the U.S. . . . In each region it’s different,” Hoehner said.

As it does anywhere, the political climate in Germany has played a key role in the industry’s growth there. No public debates over climate change or the economic benefits of renewable energy hold the solar sector in gridlock, although the popularity—and subsequent implosion—of Spain’s solar industry has moved the German government to scale back its own incentives. Still, the L.A. Times article states that any reductions in German solar incentives will be small and gradual, as the administration hopes to eventually wean the industry off of them altogether. While Germany’s solar model certainly shouldn’t be imposed on the U.S., given their different political and socio-economic environments, it provides a crucial point of comparison between the industries in both countries and will illustrate how easily—or with how much difficulty—our own solar industry can reach price competitiveness with traditional, less efficient forms of energy.