The Expensive Dream of Clean Energy Will High Costs Kill Merkel's Green Revolution?


Part 2: Solar Power Subsidies

One major indicator of the price of the future can be found in fields east of the Bavarian town of Straubing. Land that used to produce potatoes and corn is now covered with solar modules that have turned it into a gleaming blue landscape the size of 180 football pitches. Not far from there the aristocratic Thurn und Taxis family wants to launch an even bigger solar project.

This young industry is enjoying an incredible boom, but one that has come at a high price. Solar panel operators receive a fixed tariff for every kilowatt hour of power they produce. That tariff is well above the standard market price for electricity and it averages 31 cents, guaranteed for more than 20 years. At the start, no one realized the implications of this subsidy, which wasn't seen as a significant outlay because of the weak capacity of solar modules and the relatively few hours of sunshine in Germany.

But the government's unprecedented generosity regarding solar power has prompted thousands of private individuals and companies to invest in solar panels. According to the RWI institute, the total subsidy payout over the last 10 years has been €60 to €80 billion. The yield has been modest by comparison. Solar power covers just 1.1 percent of German electricity requirements. If the construction of solar panels continues unchecked -- and it appears that it will -- German subsidies will soon reach €100 billion, RWI economist Fronzel estimates. The head of the German Federal Cartel Office, Andreas Mundt, said last week that the subsidy was more suited to a planned economy than a market economy. The government is trying to slow down the expansion of solar power, which plays a more subordinated role in its new energy plan.

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