While a great deal of noise was made in the U.S. over loan guarantees to photovoltaic solar panel manufacturers like Solyndra, America is not the only solar industry to struggle through hard times and dire forecasts. Reuters reports that the solar industry in Germany, the world’s largest solar market, has faced a similarly rocky road with the legislature choosing to reduce some of the country’s crucial solar incentives and profits among solar manufacturers and solar installers declining.
To date, Germany’s solar market has dwarfed that of every other nation, adding 7.74 gigawatts of solar installations in 2010, according to industry analyst Solarbuzz. That represents nearly as much added capacity as the next five largest markets – Italy, the Czech Republic, Japan, the U.S. and France in that order – combined. According to RenewableEnergyWorld.com, the country boasted 16.5 gigawatts of installed solar capacity by the end of the year and drew around 13 percent of its electricity from solar power at noon in early February of 2011. Just this November, the German Solar Industry Association reported that the country had installed its 1 millionth solar system.
However, this growth came at a cost. The country’s solar policy differed markedly from the U.S., where solar incentives have largely entailed subsidies for manufacturers and end-users through tax relief or renewable portfolio standards, which require a certain degree of investment in solar power. These policies tend to prove less expensive for the government, by shifting costs onto utilities, or at least more palatable because they involve lower taxes.
Germany instead made use of feed-in tariffs that pay a premium rate for electricity produced from renewable sources, and particularly solar power, a policy that has been slow to gain traction in the U.S., though has recently been implemented in Hawaii.
While these tariffs led to a surge in solar development, it also allowed for strong competition from solar manufacturers in Asia and elsewhere, which has forced down prices and made it difficult for German manufacturers to compete. Meanwhile, as costs grew, the government has scaled down the feed-in tariffs for solar electricity in recent years, pushing down demand and leading solar installers to cut jobs to keep down costs.
Now legislators have called for further cuts to this program, limiting access to these feed-in tariffs to only a portion of new solar installations. Bloomberg reports that Philipp Roseler, Germany’s economy minister and a member of the junior coalition member Free Democratic Party, has called on the government to limit these crucial incentives to only 1,000 megawatts of new capacity. That amounts to less than 13 percent of the added solar capacity in 2010.
But even now the solar industry has found support from powerful figures within the German government. German Environment Minister Norbert Roettgen, himself a member of Chancellor Angela Merkel’s Christian Democratic Union, has spoken out firmly against further drawbacks in the nation’s solar incentives.
“It makes no sense to again politically question laws that have just been adopted,” Roettgen insisted, according to Bloomberg. “Insecurity is poison for the energy transformation.”
As it stands, Germany plans to withdraw rapidly from its investment in nuclear power, worried about damages to a nuclear plant in Japan caused by March natural disasters. At present the country plans to replace its nuclear energy with gas- and coal-fired power plants, but PV Magazine notes that this could dramatically increase the country’s carbon emissions. Roettgen noted that if the country has any hope of achieving the proposed emissions reductions by the target date of 2050, solar power and other renewable energy sources would need to play a major role.
Though the success or failure of Germany’s solar industry will not dictate the future of solar in the U.S., a strong market in Germany would only further development of the technology and help bring prices steadily lower.