Does solar still pay in Germany?
Solar continues to be built in Germany – quite a bit of it, actually, relative to peak summer demand. Nonetheless, the market is poised to be roughly cut in half this year – for the second year in a row. A major German solar planner seems to be in financial trouble. How low can Germany go?
First, the good news: Germany installed just over 204 MW of PV in May, as the country’s Network Agency announced (in German) a few days ago. Germany is on target to install 1,984 MW for 2014 as a whole, equivalent to roughly 1/30 of its summer peak demand. To reach such a level, the US would need to install around 20 GW per year.
Now, the bad news: Germany installed just over 204 MW of PV in May, putting the country on target for 1,984 MW this year. You see, the country had 7,500 MW per year each year in 2010, 2011, and 2012. Installers have seen their market cut 75 percent.
On Tuesday, we saw one prominent example of the effects when German project planner Juwi announced (PDF in German). Allegedly because of the changes made to Germany’s Renewable Energy Act, “investors have lost confidence in wind power projects for the time being,” and the firm says its revenue from PV is only a quarter of the volume for 2012. A quarter of firm’s employees are going to be laid off, most of them in Germany.
At present, German feed-in tariffs for PV drop by one percent per month, equivalent to 11.4 percent annually. But as Photon’s overview of prices for PV equipment reveals, prices have been stable over the past two quarters (below, I include the chart for polycrystalline panels, but charts for other types of PV and inverters look quite similar).
Increasingly, the margins are disappearing for PV systems for new investors. Granted, as the market slows down, the “breathing corridor” kicks in; the monthly reductions for new systems decrease. In fact, feed-in tariffs will even remain stable – no monthly reductions – as soon as less than 1,500 megawatts is installed.
As more and more German solar firms fold and more people are laid off within the sector, one can’t help but wonder whether all of this could not have been prevented. The solar sector itself resisted all attempts to reduce feed-in tariffs or employ any kind of annual limit during the years of 7.5 GW of new installations. Photon warned of a pork cycle when the breathing corridor was implemented; German renewables professor Volker Quaschning explained (PDF in German, but initially at the beginning of 2012) why a total of 200 MW need to be installed in Germany was necessary, and Solarpraxis ran with the idea.
Never mind that the government wants to discontinue feed-in tariffs for PV once 52 GW has been built – or that the official 2011 roadmap for the Energiewende has 67 GW of PV installed… in 2050.
From the viewpoint of installers, it would have indeed been better to break the market up into segments so that, say, the roughly 22.5 GW built from 2010-2012 could have been stretched across six years instead of three. Firms like Juwi would then not have hired so many people that it now has to layoff. But the firms themselves campaigned hard for the 7.5 GW boom to continue.
Now, the government is imposing a surcharge on solar power consumed directly (without being sold to the grid). It will make this electricity a few cents more expensive per kilowatt-hour, thereby forestalling for a brief time what is likely to be a completely new PV market – one in which firms and households alike find that, with or without the surcharge, solar is cheaper than power from the grid, even including storage. No one quite knows what that future will look like for firms like Juwi or when exactly it will begin. It may come too late for a lot of Germany’s current installers. (Craig Morris)