Germany not to discontinue subsidies for PV
This week, a basically accurate report on Germany's Energiewende at the BBC nonetheless contains a few errors, the biggest one concerning the word "subsidies," which was widely circulated in the press.
Yesterday, a report at the BBC provides an in-depth overview of the situation in Germany, partly because the author used EnergyTransition.de in his research. Nonetheless, he makes a number of minor mistakes in passing that are worth clearing up.
First, there is the whack-a-mole confusion about feed-in tariffs allowing people to "sell the surplus energy to the national grid." Actually, Germany has no national grid – it is broken up into four transmission zones, and the country has more than 800 distribution grid operators – and feed-in tariffs do not know the term "surplus." Feed-in tariffs in Germany pay for renewable electricity irrespective of your personal consumption.
Then, the author claims that the Bioenergy Village of Jühnde was the "first energy cooperative" in 2005. In reality, the movement started in the early 1990s with energy cooperatives, and by 2005 there were 77 (the figure is closer to 1,000 today). If anything, Jühnde was the first village to build a district heat network connected to a local biogas unit.
Unfortunately, the author calls German feed-in tariffs "generous," although the target ROI (which is not guaranteed) is only around six percent. One wonders what he thinks of the much greater profit margins (which are guaranteed) for energy corporations.
Finally, the BBC calls feed-in tariffs (notably, for wind power, which has always received the lowest feed-in tariffs) "high subsidies paid directly by the consumer." I have explained elsewhere why feed-in tariffs are not subsidies, so I will focus here on the confusion caused when we think of feed-in tariffs as subsidies. This week, Environmental Minister Altmaier stated that Germany will reach its goal of 52 gigawatts of photovoltaics by 2018 rather than 2020, at which point feed-in tariffs for photovoltaics will no longer be offered for new systems. This insight is nothing new; German grid operators said last year that the ceiling would be reached in 2017.
The press has reported in English that Germany is planning to discontinue "solar subsidies." In reality, only feed-in tariffs will end; there is no talk of any end to actual subsidies for, say, research, etc. And as at least one newspaper pointed out, feed-in tariffs, which are offered for 20 years, will in fact not expire in 2018, but 25 years from now. (Craig Morris)
As James said... A FiT may or may not be a subsidy based on the setting. If the FiT is set at the value of the energy then it's not a subsidy. I know of no explicitly value set FiTs outside of Austin Texas and they call that mechanism a Value of Solar Tariff (VOST) - I'd advocate for a Value of energy tariff (VET) as a better marketing gimmick but value based price setting is the same in either case. Australia comes close to a value based price with their 8 cent/kWh FiTs but it's unclear to me whether they set those rates based on charts or darts.
It is absolutely ridiculous... absolutely... RIDICULOUS... to say that FiTs aren't subsidies when they're set above value. It's disrespectful to say that all this public goodwill and spending and political work isn't a subsidy. It's insulting. Cuss. This idea that some EU court says that FiTs aren't subsidies is just goofy fooly goofy. Cuss.
It's frustrating to have to argue with one of the few great energy writers we have (you're top five Craig) over something like this. On this one you're way out in pfft field. I used to read your blog and from that I learned that you're an exceptionally stubborn guy and I completely respect that but smart people know when to call it. You've doubled down instead of calling... Makes no sense to me.
The attention should be on how do you get from the current small subsidy to a full value based FiT. Battle won.
Correction:
" With the consequence that the electricity price which households and small companies pay will by about 1 cent/kWh LOWER THAN PREVIOUSLY "
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Electricity producers are also huge electricity consumers. Meaning the market price for fossile and atomic electricity will go up, increasing the competitivness of RE. What will result in better marketing conditions and therefore a faster reaching of the RE-quantity limit at which no more high FITs will be payed. For PV that is 52 GW.
We will see.
@ James Wimberley:
The FITs were designed (in Germany)to help the fledging RE industry getting independant on artificial help, on subsidies.
They were not designed to "save the planet".
Hence the EU supported the FITs.
They are limited in duration and quantity. Similar to most electricity/energy contracts around the globe. Be they RE or not.
The EU authorities are still backing the FITs, they are now demanding (according to press reports from this weekend) that exemptions on RE-obligations to large scale electricity users must be banned. With the consequence that the electricity price which households and small companies pay will by about 1 cent/kWh. There might be a huge pay-back as well since the EU Commission says that these exemptions on RE-obligations had always been illegal.See
http://www.tagesschau.de/wirtschaft/oekostrom-befreiung102.html
http://www.sonnewindwaerme.de/panorama/fast-jede-fuenfte-kilowattstunde-ist-2014-befreit
Heinbloed: the EU Court of Justice isn't an authority on economics or language. It's a court interpreting the law to get a sensible result. Neoliberal doctrine (subsidies = short-run allocative inefficiency) clashed with common sense (saving the planet is more important) , and common sense won.
Heinbloed: the EU Court of Justice isn't an authority on economics or language. It's a court interpreting the law to get a sensible result. Neoliberal doctrine (subsidies = short-run allocative inefficiency) clashed with common sense (saving the planet is more important) , and common sense won.
The EU High Court has decided the FITs are no subsidies. Neither in Germany or anywhere else.
Nearly the entire US-electricity industry lifes on FITs
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Britain not to end subsidies for coal :
http://www.telegraph.co.uk/finance/newsbysector/energy/10169705/UK-Coal-falls-into-hands-of-state-pension-rescue-scheme-after-blaze.html
If FITs are subsidies (which as I wrote depends on the price not the mechanism), then if Germany is ending FITs, it's ending subsidies. But since Germany is not ending FITs any time soon, I don't really see your point.
James, whether you think FITs are subsidies or not, Germany is ending FITs for PV, not subsidies for PV.
PS: if you assume that current FITS for onshor wind and solar are at or below grid parity, the right way of looking at the FIT subsidy is as a large medium-term mortgage (or to be more exact portfolio of 20/25 year mortgages, as the obligations were incurred each year in the last decade at different prices), payable by non-exempt electricity consumers in general to renewables generators. It's a fixed contractual obligation (a href="http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000294376/The+German+Feed-in+Tariff%3A+Recent+Policy+Changes.pdf"€12.7 bn annually in 2012, with an NPV of €190bn over 20 years at 3% if it stays flat). As Germany isn't Spain, it will surely be met. I agree that the Anglo discussion on this fails to make the crucial distinction between this walled-off legacy debt and new subsidies for offshore wind and geothermal, which are open to discussion.
An FIT is a subsidy if it's higher than the market rate. A tax credit, as in the USA, is a subsidy. A renewables obligation is a subsidy. No economist will acept your definition that only cash grants are subsidies.
On the economists' definition, it's not obvious whether current German residential FITs are subsidised or not. They are lower than retail, but higher than wholesale. Where is the market price for electricity at the local distribution grid (most residential solar electricity is used locally), excluding regional and national distrbution costs? Crudely, the current FIT is more or less at parity with this unknown price. "Feed-in tariffs in Germany pay for renewable electricity irrespective of your personal consumption." So at present you sell all your solar output to the distributor at 15c€/kwh and then buy back all your domestic use at 25c? If so, there's an enormous and perverse incentive to go off-grid, or split your installation into grid-connected and grid-independent halves.