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Energy policy

Changes for solar in Germany

While the German government does not specifically plan to change the design of feed-in tariffs for PV this year, the application of the renewables surcharge to solar power directly consumed does change things considerably. Today, we review what's in store, though the details are not completely clear. It seems the German government may have finally come around to the idea of reining in "grid defection."

First, let's review the current policy that is unlikely to change.

  • Feed-in tariffs will be offered for PV until 52 GW has been installed. (There is no such limit for other technologies, all of which are also eligible for feed-in tariffs.) At the end of 2013, the country had around 35 GW, with an additional 3.4 GW installed last year. In the first two months of this year, however, the market has slowed down further. The ceiling is expected to be reached by the end of this decade.
  • There is a target corridor of 2.5-3.5 GW of newly installed PV capacity per year. If growth is within that corridor (such as in 2013), rates for newly installed systems will drop by one percent each month, equivalent to 11.4 percent over the year.
  • These new rates apply for 20 years starting in the months of the grid connection. In other words, the monthly reduction in FITs affect only new systems, which are then locked in at the rate applicable that month for 20 years.
  • Rates are reviewed every three months. For instance, installations during the time frame from July 2012 to June 2013 were tallied in July 2013, and the rates were adjusted accordingly for three months starting in August 2013. Because monthly statistics are published within a month, the public can tally their own figures and easily predict FIT changes.
  • Depending on how much was installed, the rates change as indicated in the table below.

New capacity Monthly reduction Equivalent annual reduction
> 7.5 GW 2.8 percent 29 percent
6.5-7.5 GW 2.5 percent 26 percent
5.5-6.5 GW 2.2 percent 23 percent
4.5-5.5 GW 1.8 percent 19 percent
3.5-4.5 GW 1.4 percent 15 percent
2.5-3.5 GW 1.0 percent 11.4 percent
2.0-2.5 GW 0.75 percent 9 percent
1.5-2.0 GW 0.5 percent 6 percent
1.0-1.5 GW 0 percent 0 percent
< 1.0 GW -0.5 percent -6 percent


That is what will not be changed. Furthermore, whatever new rules are adopted, it is highly unlikely they will affect existing systems.

The main change that will affect solar is the application of the renewables surcharge to power consumed directly. Up to now, this surcharge has been applied only to power consumed from the grid, but now it is to be applied to some electricity consumed directly – before it is sold to the grid.

 - An installer building a solar roof in the Bremer Höhe project in Berlin, in which tenants by their power from solar arrays directly. The German government seems to be clamping down on such business models, though no explicit statements to this effect have been made.
An installer building a solar roof in the Bremer Höhe project in Berlin, in which tenants by their power from solar arrays directly. The German government seems to be clamping down on such business models, though no explicit statements to this effect have been made.
Berliner Energieagentur

In order to further protect industry, it seems that conventional generators are to remain exempt, but commercial PV (systems larger than 10 kilowatts) will have to pay roughly 70 percent of the renewables surcharge, equivalent to 4.4 cents per kilowatt-hour.

I can only assume that the government has realized that, with the cost of solar now ranging from 9-13 cents per kilowatt-hour and retail rates closer to 28 cents, that there is no stopping solar going forwards; whenever feed-in tariffs are done away with, the market will continue to grow. And because solar power will increasingly have to be stored beyond 10 percent of total power supply (we are currently at five percent), it needs to be reined in somehow (see the discussion about "grid defection" at the Rocky Mountain Institute).

PV arrays installed by 1 August 2014 would not have to pay this surcharge, nor would arrays smaller than 10 kilowatts, so that practically all homeowner roofs will remain unaffected. The commercial sector, however, was always the one that would have benefited most from the policy of Eigenverbrauch (direct consumption); starting in 2009, the government actually encouraged this kind of grid defection, but now it seems to have realized what I wrote back in 2010: encouraging everyone to go off the grid is a terrible idea.

But I am only assuming the German government has reached this conclusion; no statement has been made to this effect.

Another fledgling business model would, however, suffer: direct sales of solar power to tenants. Those who rent would have to pay the full renewables surcharge (currently, 6.24 cents per kilowatt-hour. Because less than half of Germans own their own homes/apartments, the rental sector represents a potentially huge market for PV. An entire neighborhood in Berlin is now able to purchase solar power directly, but battery storage makes PV roughly twice as expensive. Adding on the renewables surcharge will be another deterrent to this kind of grid defection. (Craig Morris)

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1 Comment on "Changes for solar in Germany "

  1. James Wimberley - 03.04.2014, 17:26 Uhr (Report comment)

    The government's target corridor of 2.5-3.5 GW of new installations a year would give an annual FIT degression of 11.4%. That's quite high - it's reasonable for the long-term price trend, but the short-term one is flat prices, so the immediate proposal is for a cut in support in real terms. This at a time when the installation rate is still falling.
    How long before solar FITs fall below market prices and become irrelevant? The shift to market contracts (as per the Brussels/Chicago manifesto) will require institutional innovation. German distribution companies will have to become active market-makers, offering multi-year PPAs (power purchase contracts) to their customers - no homeowner will accept a merchant price varying all the time with the wholesale rate, but businesses may. These contracts will be differentiated by time of day, thus supporting E and W facing installations and distributed storage. The distributors will need to be given some remote control over home batteries.
    Meanwhile the "wise virgins" who locked in high FITs early will come to be envied as a privileged class of rentiers.

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