Is the German Solar Dream Coming to An End?

Germany used to be one of the cornerstones of the European solar industry. But times have changed and what has so far been considered as the avant-garde of renewable energies is facing a grim reality.

A number of German solar panel producers have run into serious economic troubles. The most recent case is the company Q-Cells which filed for bankruptcy earlier this week. For some time Q-Cells used to be the biggest German producer of solar modules.

Another company, Phoenix Solar, is struggling with massive financial problems. The same is true for Conergy which, in addition, suffered from serious management errors. Solon, Solar Millenium and Solarhybrid filed for bankruptcy during the past four months. Even the brightest star on the German sky, Solarworld, is no longer as shiny as it used to be due to a changing economic environment.

Pampered by abundant subsidies Germany´s solar industry saw a massive growth during the past 10 years. However, recently two crucial factors came into play which led to a substantial shift. On the one hand, there was a discussion in Germany as to how much money should be pumped into renewable energies. Economic analyses revealed that more than EUR 100 billion have been directed towards renewables so far. With ever growing installed capacities this amount is bound to grow over the coming years, thus putting a substantial burden on electricity consumers who, in the end, are paying the bill. As a consequence and in order to keep subsidies under control feed-in tariffs have been cut drastically recently.

On the other hand, German producers of solar modules are increasingly suffering from competitors, especially in China. This led to a slump in prices for PV modules (more than 70 % since 2009) which, in turn, increased the pressure on German companies. Being under pressure from two sides, PV producers are now facing a different reality than at the time when solar industry took off.

The figure below shows the development of electricity produced from PV.

PV power production and share in the electricity grid. Source: AG Energiebilanzen.

Although these the growth rates were impressive, starting from virtually zero in the year 2000, the contribution of PV to the power grid remained rather modest (3 % in 2011). Given the low share of PV in electricity production, the question arises what level of subsidies is considered to be justified. One may even wonder if feed-in tariffs are to be abolished at all.

What is going to happen? Once the market forces have done their work, PV will continue its upward trend, though at a more moderate pace. But most importantly, the vast majority of PV modules will come from China, thus leaving not much room for production in Europe. What is bad news for the solar industry is, in turn, good news for the consumers and for investors who will see lower investment expenses as the prices for modules have fallen dramatically.

PV as such is not to be blamed for the current problems. On the contrary, PV fills a useful niche in the power grid, but not more than that. However, what is to be blamed is a legal framework which created the illusion of a quasi risk-free economy where feed-in tariffs were guaranteed for 20 years and even paid for non-produced electricity in case of network problems caused by the renewables themselves. The price for this illusion was first to be paid by the consumers and now by the people losing their jobs in the companies going bankrupt.

Photovoltaics has certainly a future in Germany as in other parts of Europe. However, its growth needs to be based on a sound economic environment. This process is now under way. It goes without saying that PV will always be a minor player in the field. Nevertheless, it has a role to play and maybe, on a smaller scale and by using smart storage technologies, it may develop  into a key power source for local communities.

19 comments on “Is the German Solar Dream Coming to An End?

  1. The third point is that finally the Germans became fully aware that they need electricity during their peak hours in the winter, while PV delivers mainly in the summer. Yes, photovoltaics will play a (modest) role in the European power grid and will lead to relative low electricity prices all over Europe around noon in the summer.

  2. “Solar PV has a more pronounced generation profile than wind. Large scale solar generation will not produce at full nominal capacity even during clear skies at noon, due to dirt accumulation on panels and varying panel orientation. At low penetration levels, PV usually helps the system as it produces during those hours of the day in which electricity demand is highest. At higher levels, however, this turns into a disadvantage as the electricity generation near noon starts to approach the level of electricity demand. Further increases of PV would then require increasing day-time consumption or generation curtailments”

    source:
    http://www.lbst.de/ressources/docs2012/EP-08_European-Renewable-Energy-Grid_
    JAN2012_PE-475-085.pdf?language=en&file=42728

    • Math,
      your link does not seem to work.
      One way to make solar PV more reliable and grid-friendly is to combine it with storage capacities like batteries etc. Then the electricity produced by solar modules could be fed into the grid whenever it´s appropriate.

      • Excellent point! I think that solar PV will be much more reliable in the future when combined with powerful storage capacities.

    • In my opinion PV should always be used together with some kind of storage like e.g. fuel cells or batteries. And there is no problem with expanding PV in Germany either. However, the current framework of subsidies should be reconsidered.

  3. The value of electricity depends more on the time of generation than on the place of generation.

    In my opinion, for the time being, it makes much more sense to deploy PV where the demand for electricity is highest during hours of sunshine.

    Without (hidden) subsidies the solar dream in Germany will be delayed for at least 10 years. But of course the Germans a free to choose for going on with (hidden) subsidizing.

    • Math–

      I disagree! It also strongly depends on the place of generation. Recently in Britain, millians of pounds were paid for a few days of high wind, because the generatino occurred where insufficient transmission capacity existed. A similar thing happens here in the U.S., only this “stranded” capacity is simply wasted/turned off (the same guaranteed payment plans as Britain do not exist here, for the most part.)

      The same thing can also happen with PV. This is why at high renewable market share levels, the smart grid needs things like energy storage .

      –Keith

      • Keith,

        I agree with your comments, ie that we need good reliable state-of the art storage systems, but there is enormous amount of work going on both in Britain, in the US and Canada. They are networking their Wind Power systems ( on the principle that wind blows somewhere at some time ) using HVDC lines . Imagine using Wind as baseload(3000 MW for starters) and as spinning reserve?!!( yes it is happening in the US, Canada and Britain !)

        Ranjit F. Wijeratne
        Sri Lanka

      • Ranjit

        “on the principle that wind blows somewhere at some time”. That will be right for wind, but the discussion started about solar.

  4. Keith,

    Of course wind, specially offshore, needs high voltage lines but these lines can be used for 3500 full load hours rather evenly spread over the year, but a bit more in the winter. Wind also needs storage

    For solar, be aware that Munich is on the same North latitude as Vancouver, and Germany’s electricity demand peaks in the winter. Solar needs seasonal storage.

    • Math–

      One reason wind needs storage is because over the space of an hour, power can go from 100% to 0%, and the grid doesn’t like that…

      I think (obviously) that solar also needs daily storage. Seasonal solar electricity storage is going to first require a comprehensive cost analysis to see if the economics can possibly work. A priori, batteries will be too expensive, and I don’t know if the round-trip efficeincy of electrolyzers/fuel cells with subterranean gas storage will work out.

      –Keith
      http://blog.fuelcellnation.com

  5. Many thanks for the excellent article and comments. It seems that Europe is again losing out to China with regards to sales; perhaps Europe should concentrate on R&D and then sell designs to China. Electricity storage seems crucial if are able to use energy when we require it. I believe both wind and PV have huge roles to play in our energy mix and decentralised power. I would like to know how much renewable energy is being incorporated into the huge amount of construction that is going on in many African and Asian cities where solar and PV should be far more efficient that in Europe?

    • Yes indeed, renewable energy seems to have a huge potential in some African and Asia countries. It is only a matter of time until they will start making use of it on a larger scale.

    • Gary,

      I dont know if both Asia and Africa has significant Solar PV power in their energy mix ( India is making a lot of headway there ) to powere construction but see what they are doing in the United Arab Emirates, ie in Abu Dhabi ? They are building a brand new city for 55,000 people which will be powered entirely by renewables – see the Masdar city Project. Construction is powered increasingly using Solar PV/BIPV and CPV , already installed on the project site.

      Ranjit F Wijeratne

      Sri Lanka

  6. Pingback: The slow death of the solar energy industry «

  7. There are also reports that the chinese producers are highly subsidized to underprize any foreign PV producer. I guess EU could only help surviving their PV industry through using the same policies as China does, namely to state that any government subsidized PV park should be made of at least 50% EU parts and services.
    The story also shows that when you start creating a market you should also think about the consequences of leaving the market too soon.

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