Cost of Solar Energy Revolution: Four Pints of Beer
Nevada is the latest among several states to consider a feed-in-tariff as a way to boost renewable energy, specifically small- to mid-scale solar power. States are having various levels of success with the feed-in-tariff model, and many of those plans were crafted based on the success and failures of Germany’s feed-in-tariff program.
I learned about Germany’s program in December while in Berlin attending a week-long energy study with the American Council on Germany. There I met journalist Erik Kirschbaum who, in 2007, had just written about Germany’s emergence as the world’s largest producer of photovoltaic electricity. He decided to install a few solar panels on his own roof in Berlin.
“I wanted to create green energy, and it seemed to make economic sense,” said Kirschbaum.
Despite living under a thick blanket of clouds most of the year, Germany spawned a boom in solar energy development. It was financed through a feed-in-tariff, or a fee paid by all electric consumers. Some in Germany equate the annual cost of the FIT for the average German household to the price of about four pints of beer at a German pub.
A portion of the money generated from the FIT is used to supplement investment in renewable energy. One way that’s accomplished is using tariff monies to buy renewable energy generated from anyone who can plug it into the electrical grid.
Kirschbaum installed a 5,000 kilowatt hours per year solar power system on his roof and carport, borrowing money for about half the cost — 30,000 euro, or about $39,900 American dollars. His utility company is required to pay him 65 cents (American) per kilowatt hour for the solar power for a fixed 20-year period.
He was paying about 24 cents per kilowatt hour, purchasing about 4,500 kilowatt hours per year. Kirschbaum was pumping more electricity into the grid than he was taking out, plus he was making more than enough to pay off his solar power loan.
“I was thinking; What’s to stop somebody from borrowing the whole thing and covering a whole roof?” said Kirschbaum.
In 2008, Kirschbaum went back to his bank and borrowed $53,000, striking a deal with a local kindergarten to install a 9,000 kilowatts per year capacity solar system on the school’s roof. By then, the solar subsidy had been re-adjusted, paying him 61 cents per kilowatt hour instead of 65 cents. But that didn’t matter, said Kirschbaum, because there was a rush on solar power which drove down the cost of solar panels.
Kirschbaum kept going. He borrowed another $106,400 for an even larger solar power system on another school. Then he and a friend from London partnered to build an even larger solar system at a German farm, borrowing $665,000.
Earlier this year, Kirschbaum said his solar energy systems earned just enough to pay his loans. Germany leaders promise to adjust the solar power incentive downward to “correct” the run-away build-out it created, dominating demand for the world’s supply of solar equipment.
But the tinkering with the FIT doesn’t worry Kirschbaum. The rates he earns from his utility are locked-in for 20-year terms. He figures the solar incentive will pay off his investment loans in fewer than 10 years, then provide a sizable extra income for 10 more years and possibly for the rest of his life.
“I still think it’s a good investment. I don’t regret it,” said Kirschbaum. “I really like the idea of eliminating a lot of tons of CO2 just by signing a loan and borrowing some money. And hopefully it will turn a profit.”
Kirschbaum, like many Germans, believes that as renewable energy grows and the technology improves renewable energy will no longer need subsidies to reach parity with fossil fuels. Kirschbaum said he’s not afraid the German government might one day back away from its renewable energy commitment. Germans and their government are committed to renewable energy, he said.
“I don’t think anybody in Germany is worried about the government changing course,” said Kirschbaum. “No one — no one — is talking about cutting what’s already been built. That would be tantamount to fraud.”
Here in the U.S., a growing number of households and businesses are eager to capture the sun to supplement their electricity usage or get paid to pump electricity back into the grid. But customers are at the mercy of their utilities and the policies set by individual state public utility commissions. In a future WyoFile Energy Report, I’ll write about the small successes and challenges Wyomingites face in “net-metering.”
— Contact Dustin Bleizeffer at 307-577-6069 or firstname.lastname@example.org.
Germany’s progressive view of energy has raised the bar for the rest of the world. It has also had a direct and welcome impact right here in Wyoming. Germany’s feed-in-tariff drove a dramatic increase in demand for solar modules and related equipment. Cloudy Germany, in 2009, installed 3,800 megawatts of new solar capacity. The US installed 481 megawatts. On a per-capita basis, that translates to 48 watts for every German and 1.6 watts for every American. Germany, several of it European neighbors, Japan and Korea have created a booming solar industry. We in the US get to ride on their coat-tails. As the demand for solar equipment increased 60-fold from 2001 to 2009, new solar panel manufacturing capacity was added around the world. Today, a solar panel costs about half of what it did eight years ago. The US is now beginning to catch back up to the world’s solar leaders thanks to the lower costs made possible by Germany’s bold feed-in-tariff.
A national or state-by-state feed-in-tariff could be a powerful driver for renewable energy development in the US. Given our tremendous solar resource and given the declining cost of solar power systems, a feed-in-tariff dramatically smaller than those employed in Germany and elsewhere in Europe would be able to mobilize solar investment here.
Wyoming’s sun continues to drench roofs devoid of solar panels. More than any other factor, it is our shockingly low cost of electricity that impedes our progress toward greater use of renewable energy. In Wyoming we pay from 3.6 cents to about 9 cents per kilowatt-hour for our energy. As compared with other parts of the country where rates are commonly 12 to 15 cents per kW-h, or Germany at 24 cents as referenced above, our motivation for producing our own energy from the sun is low. A feed-in-tariff of even 20 cents per kW-h – just a third of what is offered in Germany or Ontario would motivate lots of home or business owners to finally make use of Wyoming’s most abundant energy resource.