Solar Subsidy Sinkhole: Re-Evaluating Germany's Blind Faith in the Sun

By Alexander Neubacher

Part 2: Solar Energy's 'Extreme and Even Excessive Boom'

Photo Gallery: Solar Energy Flounders Photos
DPA

Another critical voice, the German Advisory Council on the Environment, argues that far too much money is being invested in solar energy. "Solar energy has recently experienced nothing less than an extreme and even excessive boom," says environmental expert Olav Hohmeyer, noting that this jeopardizes acceptance of renewable energy even before the energy transition has truly begun.

Solar lobbyists like to dazzle the public with impressive figures on the capability of solar energy. For example, they say that all installed systems together could generate a nominal output of more than 20 gigawatts, or twice as much energy as is currently being produced by the remaining German nuclear power plants.

But this is pure theory. The solar energy systems can only operate at this peak capacity when optimally exposed to the sun's rays (1,000 watts per square meter), at an optimum angle (48.2 degrees) and at the ideal solar module temperature (25 degrees Celsius, or 77 degrees Fahrenheit) -- in other words, under conditions that hardly ever exist outside a laboratory.

A Costly and Unnecessary Dual Structure

In fact, all German solar energy systems combined produce less electricity than two nuclear power plants. And even that number is sugarcoated, because solar energy in a relatively cloudy country like Germany has to be backed up with reserve power plants. This leads to a costly, and basically unnecessary, dual structure. Figures indicating the peak performance of solar energy systems are easily misunderstood, a report by the German Physical Society says. "Essentially," the report concludes, "solar energy cannot replace any additional power plants."

In Germany, solar is by far the most inefficient technology among renewable energy sources, and yet it receives the most subsidies. Some 56 percent of all green energy subsidies go to solar systems, which produce only 21 percent of subsidized energy.

The relationships are just the reverse for wind energy. For the same cost, wind supplies at least five times as much electricity as solar, while hydroelectric power plants generate six times as much. Even biomass plants are still three times as efficient as solar. Because of the poor electricity yield, solar energy production also saves little in the way of harmful carbon dioxide emissions, especially compared to other possible subsidization programs. To avoid a ton of CO2 emissions, one can spend €5 on insulating the roof of an old building, invest €20 in a new gas-fired power plant or sink about €500 into a new solar energy system.

The benefit to the climate is the same in all three cases. "From the standpoint of the climate, every solar system is a bad investment," says Joachim Weimann, an environmental economist in the eastern German city of Magdeburg. Hans-Werner Sinn of the Munich-based Ifo Institute for Economic Research calls solar energy a "waste of money at the expense of climate protection."

For a time, it seemed that at least the German solar industry was benefiting from the generous subsidy rates. But the green economic miracle has, in the case of the solar industry, turned out to be a subsidy bubble.

Germany's Declining Share in the Solar Business

In 2004, Germany held a 69 percent share of the global solar panel business. By 2011, it had declined to 20 percent. Former industry giant Solarworld, based in the western city of Bonn, is having problems. Solon and Solar Millennium, once considered model companies, have gone out of business. Schott Solar shut down a plant that was producing solar cells in Alzenau near Frankfurt, shedding 276 jobs and losing €16 million in government subsidies in the process.

Chinese competitors offer systems of equivalent quality at significantly lower prices. It appears that the subsidies have made the German manufacturers lethargic. They invest only 2 to 3 percent of revenues in research and development, compared with an average of 6 percent in the auto industry and about 30 percent in biomedicine.

Economics Minister Rösler wants to cap subsidies for solar energy systems. Under his proposal, further expansion would be limited to 1,000 megawatts this year, or 6,500 megawatts less than last year. A proposal by the Monopolies Commission, which is supported by the German Council of Economic Experts, goes even further.

The economists want to eliminate the subsidization of solar energy under the Renewable Energy Law. They argue that energy providers should be required to satisfy a green electricity quota, but without specifying in detail what they should do to fulfill the quota. This would stimulate competition to come up with the best technology.

According to the experts, the advantage over the current system is obvious: Money would no longer be invested in places where the highest subsidies are paid, but where the most green electricity can be generated.

Translated from the German by Christopher Sultan

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