Black Hole Sun: Germany Spends €100 Billion in Solar Subsidies

Step aside Solyndra. Germany is the true leader when it comes to solar boondoggles. Over the past decade, Germany has spent over €100 billion subsidizing solar energy. In 2011 alone, these subsidies topped €8 billion ($10.2 billion). Yet solar is still a niche industry in Germany, generating only 3 percent of its electricity. That's about the size of two nuclear power plants.

The main source for these subsidies have been feed-in tariffs (FiT). One blogger vividly described FiT:

Imagine if the government forced supermarkets to buy bread from plain white bread bakeries, ordered them to pay these bakeries a fixed price that’s 5 times higher than normal for 20 years, and forced them to buy up all the white bread these bakeries could produce, whether needed or not...that's exactly what Germany is doing with electricity.

First used in the early 1990's, FiT became a lavish subsidy after the German Renewable Energy Act (EEG) was enacted in 2000. Basically, FiT mandate utilities to buy renewable energy at a higher cost, with the tariff benefiting the owner of the renewable energy project. As a sweetener, these tariffs are locked in for 20-year contracts. Because of this, the German think tank RWI estimates that the contracts for solar installations just in 2011 will top €18 billion over the next two decades.

Technically, utilities are supposed to bear the higher costs, not the ratepayer. But as RWI elaborates:

While utilities are legally obliged to accept and remunerate the feed-in of green electricity, it is ultimately the industrial and private consumers who have to bear the cost through increased electricity prices.

Unsurprisingly, Germany has the second-highest electricity prices in Europe. (Denmark, another heavy green energy subsidizer, is first.) Currently, this green energy surcharge is 3.59 cents per kilowatt hour of electricity. Each year, this surcharge adds up to €200 more in electric bills. 

To justify these higher rates, proponents claim that FiT for solar are essential to thwart global warming and incentivize clean energy innovation. But even by the logic of reducing carbon emissions, heavily subsidizing solar is a poor choice:

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.

Meanwhile, using renewable energy avoided 120 million tons of carbon in 2010. But solar energy represents just 7.6 percent of these avoided emissions, even though solar took more than half of all renewable energy subsidies.

In addition, the spurring innovation argument falls flat. German solar manufacturers only re-invest 2-3 percent of their revenues in research and development. By comparison, German car manufacturers spend 6 percent and Silicon Valley invests more than 15 percent on R&D. Besides, if energy innovation requires government intervention, then why not directly subsidize energy R&D?

However, the feed-in tariff has been very successful in installing new capacity. Currently, Germany has 25GW of solar capacity—half of all solar capacity on the entire planet. In fact, Germany installed more capacity last December than the United States did in all of 2011.

But capacity isn't the same as actually generating energy. Der Spiegel explains:

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.

Unsurprisingly, Germany rarely has peak conditions for solar power. While FiT might work in places that are actually sunny (e.g. Gainesville, Florida), Germany averages only 1,528 hours of sunshine a year, or one-third of all daylight hours. That's actually less sun than Seattle gets. One utility CEO even compared subsidizing German solar to "growing pineapples in Alaska."

Thankfully, fiscal sanity is starting to catch up with FiT. In Germany, a proposed new reform would slash FiT rates each year by 24 percent, and ultimately end the program by 2017.

Reason on subsidizing renewable energy. Ronald Bailey on feed-in tariffs.

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  • ||

    The HELIOS One weapon was disappointing, I thought.

  • NotSure||

    Come on, you must have enjoyed zapping those annoying NCR troopers just a little bit.

  • ||

    It was pretty disappointing that it didn't work in Zion, for one thing.

  • ||

    I did expect more wanton devastation.

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  • yonemoto||

    Sbilla needs to learn the ways of the alt-text.

  • ||

    This shows how retarded the Greens are more than anything else. It is fucking Northern Europe you dolts. They don't call rain "German Sunshine" for nothing.

    I am sorry, but this is fucking cult. Only a cult would think solar would work in Germany. I used to call it a religion. But that is an insult to religions.

  • mad libertarian guy||

    Cults and religions are the same thing, John. The only difference is the number of subscribers.

  • ||

    No they are not. But in the interest of not having every single mention of the term "religion" degenerate into the usual pissing match of aggrieved atheists and believers, I will leave your comment alone.

  • Apatheist||

    Too late. Sometimes religions are called cults to denigrate them but sometimes they really are cults. The reverse is true, Scientology is a cult but people are starting to treat it as a religion.

  • mad libertarian guy||

    Too late. Sometimes religions are called cults to denigrate them but sometimes they really are cults. The reverse is true, Scientology is a cult but people are starting to treat it as a religion.

    This kind of thinking recognizes that there is an inherent difference between what one would call a cult and one would call a religion when there isn't.

    It's all about the people who legitimize it and how many of them there are.

  • Apatheist||

    I disagree and also recognize that other people have a different opinion on what is a cult and what is not. The distinction is subjective and not really worth arguing about.

  • mad libertarian guy||

    Yes! Because believing a man walked on water or that some other dude from the same mythology lived in the belly of a whale for 3 days before being spat on a beach (ALIVE mind you) is so much more logical than believing that David Koresh is a prophet.

    Even Christianity was a cult before it reached a critical mass in believers, John. A cult that could land you in a ring being chased by lions while onlookers laughed at you because your god hadn't come save the day for you.

    Because there is no substantive difference between a cult and religion other than that religions have enough followers that they wield political power.

  • ||

    And despite all efforts to kill it, it thrived and took over the Roman world. Sure it was called a "cult". But events proved otherwise.

  • ||

    despite all efforts to kill it

    despite, or because of?

  • ||

    The is the odd and fascinating thing about Christianity. The Romans killed local Messiahs for a living. It was very easy, you found the leader and crucified him and told his followers to shut up if they knew what was good for them. They had done this tons of times. And it always worked.

    Indeed, being crucified was the most embarrassing and humiliating way to die. It was simply unthinkable for a religion to arise whose leader had been crucified. No one was more shocked than the Romans that Christianity didn't die.

    That is where atheists miss the boat. Regardless of whether you believe the claims of Christianity or not. Something very strange and amazing happened in first century Palestine. It defies all rational explanation. To dismiss it as some kind of plot by the early church entirely misses the point.

  • mad libertarian guy||

    "Events" didn't prove anything. Gaining a critical mass of believers such that they could now wield political power did.

    There is nothing inherent in Christianity (or any other major religion) that separates it from what most would call a cult. Nothing. The differences are subject only to approval ratings.

  • ||

    "The differences are subject only to approval ratings."

    Only if you believe there is absolutely no wisdom of crowds or tradition. A religion that attracts millions of followers for thousands of years is entirely different and has a much greater claim on the truth than a belief that attracts a few followers and dies after a few decades. Saying the two are the same is the reason why I don't take most atheists seriously.

  • mad libertarian guy||

    More believers = more truth?

    Try again, John. Were that true, government would be absolute truth.

  • Byron||

    No kidding. More believers = more truth is laughable. So many people have believed so much stupid shit over the course of history I can't believe you'd even advance this retarded logic.

    More believers in something that's completely unprovable and unfalsifiable simply suggests it fits with common human psychology and makes people feel good about themselves.

  • mad libertarian guy||

    No to mention that, according to John's philosophy of more believers over long periods of time means more legitimate, Islam would hold a "much greater claim on the truth" than any other religion, and I'd be willing to bet that he wouldn't dare subscribe to that argument.

  • Byron||

    No kidding. More believers = more truth is laughable. So many people have believed so much stupid shit over the course of history I can't believe you'd even advance this retarded logic.

    More believers in something that's completely unprovable and unfalsifiable simply suggests it fits with common human psychology and makes people feel good about themselves.

  • jasno||

    Religions that survive are religions that work - that is, their behavioral rules are such that they confer a survival advantage onto their adherents.

    I'm guessing christianity benefitted from the large number of rules inherited from judaism.

  • ||

    Now I have Soundgarden's song stick in my head.

    Now, I wonder which one is the biggest "jump the shark": German's solar subsidies or Gingrich's moon base?

  • ||

    German's solar subsidies or Gingrich's moon base?

    Which one was the better Bond movie?

  • ||

    There's a rational argument for a moonbase. There isn't one for solar where there's inadequate sunlight.

  • rather||

    "Unsurprisingly, Germany has the second-highest electricity prices in Europe"

    Those Germans are not going to like not being listed number one in the race ;-)

  • db||

    Are you saying Germans prefer number two?

  • :-(||

    "number one in the race"

  • db||

  • rather||

    I'm sure a "rather" was there but alas, 90% of the are sugarfree et al

  • db||

    I didn't see one. See my schtick is annoyingly deflecting others' humorous comments into paths I alone find amusing.

  • Alan Vanneman||

    Germany should move its solar "industry" to Greece. Greece would get rich and could pay off its debts and not have to listen to Germans whine about how lazy they are.

  • NotSure||

    In Germany the Green party and the general green mindset has become a serious power, the previous government had a Green become foreign minister (SPD-Green alliance). The Japanese tsunami literally swept the Green party to power in Baden Wurttemberg, a previously conservative party dominated state.

  • ||

    Something tells me the lights going out will sweep them out of power.

  • mad libertarian guy||

    The lights probably won't go out before electricity customers won't be able to afford paying for it.

  • Colonel_Angus||

    Isn't this kind of like Europe gathering up all its last scraps and saying "I've got a good feeling about that number!"?

  • Abdul||

    You know who else spoke German and used the government to enrich certain private industries while bending those industries towards an ideology that regarded humanity as a disease?

  • anon||

    You used too many qualifiers, I'm left with Hitler too early.

  • ||

    "using too many qualifiers on a hitler comparison"

    New rule for the drinking game?

  • Abdul||

    Who's Hitler? I was thinking Lena: http://www.youtube.com/watch?v=UmOeISUYXuI

  • Knarf Black||

    Somebody just gained infamy with the NCR.

  • ||

    The lefties have already advanced the argument that we can't let those darn ol' Chinese "beat" us on renewable energy (whatever the fuck "beat" means in this context).

    Now we'll no doubt hear them referring to opposition to solar subsidies as "appeasement"; a defeat in legislature or court will be referred to as a "Munich".

  • mad libertarian guy||

    The lefties have already advanced the argument that we can't let those darn ol' Chinese "beat" us on renewable energy (whatever the fuck "beat" means in this context).

    ^^THIS^^

    I have no idea what it means.

    But one guess I can take is that true believer leftists, like the kind in power right now and the ones who are controlling the narrative both in government and the media, don't believe in a free market system where, rather than having to "beat" some other entity in getting a particular product to market regardless of the cost (to taxpayers), we can engage in free trade in order to acquire it once the technology is viable and the economic costs tenable.

    I have long maintained that the left is far less concerned with having their utopia than they are with forcing others to pay for it. It's all about force for them, and allowing other nations and their citizens to go bankrupt until a economically viable product comes to market then acquiring it via free trade transactions where individuals put up their money based on their own needs and desires doesn't involve force, and they're therefore opposed to the very idea of it.

  • BC||

    I actually think it's nothing more complicated than pandering to racial anxieties. Yellow Menace, and all that.

  • ||

    There is a dude that knows whats going on man.

    www.puter-privacy.tk

  • sadgj;hk||

    In related news, BMW Motarrad's new 800 twins are the most full-efficient engines this side of diesel, but totally suck.

  • cynical||

    You know, I could even see adding a small subsidy for distributed solar (but capped at a low amount for each address). There are some security benefits in distributed energy, insofar as less damage is done if plants are attacked. But allowing Big Green to reap profits at the expense of the German taxpayer is uncalled for, especially since Europe actually does have a carbon indulgence market.

  • Scott||

    And thanks to the renewable energy mandate passed in California, the same thing is going to happen here. The state government has essentially forced a demand for solar power and the federal government is subsidizing it with construction loans (as long as you belong to the right unions).

  • Just an Engineer||

    So you're telling us that AGW is really just a plot to defeat the germans. Brillant!

  • Barack Obama||

    We must not fall behind Europe in stupidity!

  • ||

    Wow, what a complete load of horse shit this article is. If you had any understanding of energy subsidies across the board or just energy economics in general, you'd realize how pathetic you really are. Go sell your lies somewhere else.

  • mad libertarian guy||

    I love comments which say how stupid something is, and declares it by fiat.

    So enlightening they are.

    In other words, put up or shut up.

  • Thomas from Germany||

    PV Solar is anything but retarted or stupid... neither is this 100 billion figure meaningful.

    The FiT was designed with decreasing rates from the start. The demand produced by the FiT & small investors has lead to unpresidented technological & economical advances in Solar technology.
    The FiT liabilities are not subsidies and are being used to return the initial investments by hundreds of thousends of people.
    It's by far a smaller burden & more productive than the enourmous burden that is caused by American student loans...

    Acording to other studies, Solar energy is reducing market prices by 10% due to avoiding the need to fire up expensive peak-load gasturbine plants. Since they are decentralized they also do not need the high voltage grid.

    Today PV solar will provide about 7 out of 65 GW of peak load demand, decreasing the need to burn fossil fuels and our dependence on energy imports.

    Greetings from Germany.
    A nation with a society that plans ahead and makes stuff work.

  • AT||

    Your post is not very helpful, Thomas.
    You mentioned technological and economic advances. May we know what they are and how they would not have happened without intervention?
    You say "FiT liabilities are not subsidies", how so? Then you mention they are just a small burden..that sounds like a subsidy to me. In the article the implication is that companies have to charge higher prices if they have to buy the stuff at higher prices. Have you addressed that?
    That study about reducing prices and the need to fire up peak demand capacity sure sounds interesting. Can you provide a link?

    So do try leave the attitude, an actual exchange of information is most welcome on these site.

    Greetings from a country a bit to the east of Germany, a nation that holds its breath when Germans "make plans".

  • pressure washing woodstock||

    Yeah, let Thomas know how you REALLY feel about it!

    I love how after you rip into him, you're like, "and oh yeah, Greetings from my country"! LOL

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  • Nike online||

    It's how I get bait.

  • pressure washing woodstock||

    This would be a very wise investment, I'm sure that the return of these project will truly help you economy with regards to electricity.

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