Germany Solar PV Report — A Must-Read For Any Energy Reporter

November 7th, 2013 by Zachary Shahan

One of our Dutch readers, Remco van der Horst of Better Energy, recently passed along an excellent report on various aspects of Germany’s solar power boom. The report actually reads more like a fact-checking of common claims (in media and politics) regarding Germany’s rapid energy transition. It is easy to read, organized by common questions/claims, and full of interesting facts. I actually learned a few things from this one that have been itching at my mind for awhile.

I definitely recommend checking out every question and at least the short answer for it. However, I’m pulling out a few of the key ones and sharing them below. Have a look!

2. Does PV contribute significantly to the electric power supply? Yes. As estimated on the basis of figures from [BDEW3] and [BDEW4], PV generated 28 TWh [BDEW4] of power in 2012, covering approximately 5.3 percent of Germany’s net power consumption (compare section 20.8). Taken as a whole, renewable energy (RE) ac- counted for around 25.8 percent of net power consumption, while the proportion of Germany’s gross power consumption covered by PV and RE stood at 4.7 percent and 23 percent respectively. On sunny days, PV power can cover at times 30 – 40 percent of the current power consumption. According to the German Federal Network Agency, PV modules with a rated power of 32.4 GW had been installed across a total of around 1.3 million plants in Germany by the end of 2012, meaning the installed capacity of PV has exceeded that of all other types of power plants in Germany. See Figure 1.

Solar PV Prices Will Continue To Fall

“The price of PV modules is responsible for more than half of a PV power plant’s investment costs. The price development of PV modules follows a so-called price learning curve, in which doubling the total capacity installed causes prices to always fall by the same factor. Provided that significant efforts continue to be made to develop products and manufacturing processes in the future, prices are expected to continue to fall in accordance with this rule.”

Solar PV Lowers The Price Of Electricity & Cuts Into Utility Profits

“The feed-in of PV power has legal priority, meaning that it is found at the start of the price scale of power being offered. With fictitious marginal costs of zero, PV power is always sold when available. It is, however, predominantly generated during the middle of the day when power consumption experiences its midday peak and during these periods, it displaces mainly electricity from expensive power plants (especially gas-fired and pumped-storage power plants). This displacement lowers the overall electricity price and, in turn, the profits made by utilities generating power from fossil fuel and nuclear sources (Figure 8). It also lowers the utilization and profitability of traditional peak-load power plants.”

Here’s a conundrum that I think doesn’t get enough attention: “The feed-in of PV electricity reduces the stock market price through the merit order effect and paradoxically increases the calculated differential costs. According to this method, the more PV that is installed, the more expensive the kWh price of PV appears to be.”

“The cheaper the electricity price becomes on the Leipzig European Energy Exchange (EEX), the more the EEG levy increases and thus the more expensive electricity becomes for private households and small consumers.”

Fossil Fuel & Nuclear Subsidies

3.8 Are the fossil fuel and nuclear energy production subsidized? Yes. A study from the Forum Green Budget Germany [FÖS2] states: ‘For decades, the conventional energy sources of nuclear, hard coal and brown coal have profited on a large scale from government subsidies in the form of financial assistance, tax concessions and other beneficial boundary conditions. In contrast to the renewable energies, a large portion of these costs is not accounted and paid for in a transparent manner. Rather, funds are appropriated from the national budget. If these costs were also to be added to the electricity price as a “conventional energy tariff,” they would amount to 10.2 ct/kWh, which is almost three times the value of the Renewable Energy Tariff in 2012. Up to now subsidies for the renewable energies have amounted to 54 billion euro. To com- pare, from 1970 to 2012 subsidies for hard coal amounted to 177 billion euro, for brown coal at 65 billion euro and for nuclear energy at 187 billion euro respectively.

Nuclear energy is simply far too expensive and risky to warrant investment. “The risks of nuclear power predicted by experts are so severe, however, that insurance and reinsurance companies the world over are not willing to offer policies for plants generating energy of this kind. A study conducted by the Versicherungsforen Leipzig sets the limit of liability for the risk of the most serious type of nuclear meltdown at 6 trillion euros, which, depending on the time period over which this sum is built up, would increase the electricity price per kilowatt hour to between 0.14 and 67.30 euros [VFL]. As a result, it is essentially the tax payers who act as the nuclear industry’s insurers.”

Industry Exemptions Raise Electricity Prices For Normal People

“Policy makers determine who finances the transition to renewable energy. They have decided to release the majority of energy-intensive industrial enterprises which spend a high proportion of their costs on electricity from the EEG levy, and are planning to ex- tend this level of exemption in the future. It has been estimated that more than half of the power consumed by industry shall be largely freed from the levy in 2013 (Figure 19) with the level of exemption totaling 6.7 billion euros. This increases the burden on other electricity customers and in particular householders who account for almost 30 percent of the overall amount of power consumed.”

Coal Production Increased Because of Broader Market Dynamics (Beyond Germany) & Because It Takes A Long Time To Shut Down & Start Up Coal Power Plants

“Electricity is exported during the day, because it is hard to throttle back coal-fired plants (lignite) due to their inertia or because it is simply lucrative to produce power in Germany and to sell it in other countries (bituminous coal). In countries other than Germany, gas-fired plants also became unprofitable. The statistics convey a clear message: Compared to the first quarter 2012, electricity exports in the first quarter 2013 increased by ca. 7 billion kWh. During the same period, the electricity production from RE (Figure 21:) decreased by 2 billion because of weather conditions [ISE4].”





Solar PV & Wind Power Are Complementary

“Due to the country’s climate, high solar irradiance and high wind strength have a nega- tive correlation in Germany. With an installed capacity of 30 GW of PV and around 30 GW of wind power in 2012, the amount of solar and wind power fed into the grid by September 30 of that year rarely exceeded the 30 GW mark (Figure 29: ). Therefore, limiting feed-in from solar and wind at a threshold value of nearly half the sum of their nominal powers does not lead to substantial losses. A balanced mix of solar and wind power generation capacities is markedly superior to the one-sided expansion that would be brought about through the introduction of a competitive incentive model (e.g. the quota model).”

Increasing Solar Power Is Needed For Storage To Make Sense

The common talking point is that energy storage is needed for solar power to dominate the grid. However, Fraunhofer points at that more solar power is actually needed in order for energy storage to make sense.

10.6 Does the expansion of PV have to wait for more storage? No. Although the EU commissioner Guenther Oettinger in an interview with the newspaper FAZ (2 April 2013) said: “We must limit the escalating PV capacity in Germany. In the first place, we need to set a tempo limit for renewable energy expansion until we have sufficient storage capacity and an energy grid that can intelligently distribute the electricity.” In fact, the situation is the opposite. Investing in storage is first profitable when large price differences for electricity frequently occur, either on the electricity exchange mar- ket EEX or on the consumer level. Currently investments in storage, specifically pumped storage, are even being deferred because cost-effective operation is not possible. First, a continued, further expansion in PV and wind capacity will cause prices on the electricity exchange EEX to sink more often and more drastically. On the other side, the reduced amount of nuclear electricity due to the planned phase out and more expensive electricity from coal-fired plants due to CO2-certificates or taxes will cause price increases on the EEX at other times. This price spread creates the basis for a profitable storage operation. If the price difference is passed on to the final customer through a tariff structure, then storage also becomes an interesting alternative for them. A study from the German Institute for Economic Research (DIW) comes to the conclusion that surpluses from renewable energies are a problem that can be solved [DIW]. By making the electricity system more flexible, especially by eliminating the “must-run” basis of conventional power plants which is presently at ca. 20 GW and establishing a more flexible system of biomass generated electricity, the electricity surplus from wind and solar energy can be reduced to less than 2 % by 2032. The DIW takes the grid development plan 2013 as its basis [NEP] with an installed PV capacity of 65 GW, onshore wind capacity of 66 GW and offshore wind of 25 GW respectively.

In other words, what’s really needed is to cut slow, inflexible, “baseload” power from coal and nuclear power plants in order to move.

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