Friday, November 5, 2010

The Impact of Solar Feed-In Tariffs in Germany



Based on this analysis, it is difficult to justify Germany's decision in 2000 to undertake the PV solar subsidy based on a review of economic, air pollution or global warming considerations. Instead, it is an extremely expensive way to subsidize an industrial sector, create jobs and reduce CO2.

Because of the large gap between the FIT rates and utility electric rates, it is easy for German households and businesses see that a decision to “go solar” makes economic sense, much to the delight of PV solar vendors, financiers and developers who call this (for them) a success. Spain is having a similar disastrous experience with its PV solar FITs. See this article.

If we are to mitigate climate change at a reasonable cost, we must use technologies that provide the greatest reduction in CO2 per dollar invested. As a renewable, PV solar is among the highest in capital cost per installed kW and the lowest in power production and CO2 reduction per dollar invested.

Capital-intensive investments in inefficient PV solar systems that, without subsidies, have simple paybacks of 20-40 years divert resources from less capital-intensive measures, such as energy efficiency that, without subsidies, has simple paybacks of 1-5 years AND reduces CO2 more effectively AND requires no changes to the grid AND is INVISIBLE. My recommendation would be to do energy efficiency first and renewables later. There is not sufficient money to do both at the same time.

The German government had budgeted a certain amount for PV solar subsidies for 2010. Because of the rapid rate of installation of PV solar systems this amount is depleted.
The German government, already under budget pressures, is finding it politically difficult to rein in the inefficient PV solar sector which will become more harmful to the overall efficiency of the economy as it gets bigger.

The German government, over much opposition, has decreased the FITs at a faster pace than originally planned, and is planning still more rapid FIT decreases, to slow the growth of the sector to a more affordable rate. There were FIT reductions of 9-11% on 1 January, 2010, 8-13% on 1 July, 2010, and 3% on 1 October, 2010. Additional reductions are planned for 2011. These reductions are in addition to scheduled reductions. These FIT reductions caused spikes of 1,461 MW and 1,700 MW installed in December 2009 and June 2010, respectively, to beat the deadlines.


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