Chancellor Angela Merkel thinks that subsidies for Germany's solar power industry aren't doing any good, or at least aren't generating enough profit. Speaking at a regional conference of her Christian Democratic Union (CDU) on Tuesday, Merkel said that while wind energy is now almost profitable, in Germany's temperate climate, solar power was still too dependent on government money.

Already over the past two years, Germany has sharply reduced so-called feed-in tariffs, through which investors receive a guaranteed return on generated energy output. Merkel said that solar power was using up 50 percent of the government's budget for renewable energy, but was barely producing two percent of the country's electricity. "That is no rational proportion," the chancellor declared. "We have to do something about it."

Europe is by far the world's biggest market for solar power, yet it largely depends on government subsidies because solar power is still up to eight times more expensive than conventional forms of power like coal and gas.

Merkel thinks Germany should concentrate more on wind energy

The solution she proposed is one that has been mooted before: Import solar power from sunny but impoverished Greece. The idea has the support of the Federation of German Industry (BDI). "We have to put the capital where it brings the biggest profits for regenerative energy," said BDI director Markus Kerber.

Kerber, a former German Finance Ministry official, will be accompanying Economics Minister Philipp Rösler to Greece on Thursday, along with representatives from 20 other companies from the German energy sector.

Unsurprisingly, the announcements from Merkel and Kerber drew consternation from the German Solar Industry Association (BSW). "German solar energy is one of the few technologies whose growth potential makes the switch to renewables even possible," spokesman Christian Hallerberg said in a statement.

"The continual discussions about cuts hide the fact that a very ambitious, growth-dependent system for reducing subsidies already exists," he continued.

Buying sunshine

Kerber spoke of a "desperately needed" European-wide energy revolution, and explained that Greece was not doing enough to harness its sunny hours because it was still able to get cheap fossil fuels.

For that reason, Kerber admitted it would take a significant investment to make it possible to import Greek solar power, as Greece's renewable energy infrastructure needs much development. "It really would have to be a 10-year plan," he said.

Germany's solar power industry has been struggling recently. Hamburg-based Conergy and former top performer Q-Cells both went into the red in the second quarter of this year, while Phoenix Solar from Bavaria also registered new losses at the end of last month. Chinese imports in solar modules have also forced down prices.

The German government currently aids the solar power sector through legally guaranteed tariffs, as stipulated in the Germany's Renewable Energy Law (EEG). Under the law, underdeveloped regions in eastern Germany have been encouraging solar companies to set up operations in their municipalities by offering subsidies and other incentives. But not for long, if Merkel's latest statement is anything to go by - better to have the Greeks make the power and buy it off them.

Cover local demand first

But despite the lack of profits, and the apparent logic of shifting solar power investment to Mediterranean climes, the German Renewable Energy Federation (BEE) is less than enthusiastic about Merkel the BDI's idea.

"So far there's no real idea of how this is supposed to work economically or legally," BEE spokesman Daniel Kluge told Deutsche Welle. "We think a regional, decentralized system is the cheapest and most sensible solution for all of Europe."

Most of Greece's power comes from fossil fuels

"Of course it makes sense to invest in photovoltaic energy in Greece, but the energy demand there is not nearly covered by renewables," he added. "We're really a long way from turning Greece into a big European energy exporter. It isn't realistic, for practical grid-related reasons alone."

"It's much more important to develop Greece's renewable energy infrastructure for Greece's own demand," Kluge said.

Hallerberg of the BSW agreed. "The German solar industry supports the government's efforts to promote solar energy in Greece," he said. "But considering the billions it will cost to develop Greece's power grid, we cannot expect any noticeable solar exports to Germany for the foreseeable future."

European-wide grid

Finding the best sites for renewable energy plants is a key debate in the renewable sector. As far as the BEE is concerned, absolutely the wrong answer is creating concentrated centralized solar power plants in southern Europe, or even northern Africa, to serve the whole of Europe. This is, they say, not only extremely impractical, but economically detrimental, since it means the jobs and companies also have to be concentrated in one area.

"The best way to create an integrated European energy system is to make subsidies that are adapted to local circumstances," said Kluge. "Of course it's important to promote interaction, but there are still a lot of technological obstacles to transporting power across borders. Trying to make certain countries into energy exporters for all the others is really the wrong way of doing it."

Author: Ben Knight

Editor: Nancy Isenson