The German Renewable Act has successfully increased
renewable energy capacity from 6% of total generation
capacity in 2000 to 16% in 2009. However, in order
to compensate for higher demand, lower wholesale
prices and last year's levy deficit, German consumers
will have to foot a bill of E13.5 billion in 2011.
This should be a warning to other countries of
the immediate costs of such policies.
Germany's feed-in tariff has been highly successful
in terms of increasing the country's renewable
energy capacity; solar photovoltaic (PV) cumulative
capacity alone grew from 4GW at the end of 2007
to about 9GW by the end of 2009. Industry sources
suggest that this figure could even double in 2010,
a far greater increase than anticipated by the
government. Currently, investors are enjoying generous
rates for electricity generated from renewable
sources; however, as the installed PV capacity
has far exceeded the government's expectations,
these rates are set to decrease accordingly.
It seems that the government's policy has become
a victim of its own success, as solar manufacturers
kept quiet about production efficiency savings
and were able to successfully hype up sales in
the run-up to the proposed cuts to the feed-in
tariff. Rapid growth in PV installations, lower
wholesale prices (which increase the difference
between prices paid and the set feed-in tariffs)
and the need to compensate for 2009's levy deficit
mean that for 2011 the government needs to find
E13.5 billion rather than the E8 billion required
The majority of this will be paid for by German
consumers, who will see a 70% increase in the renewable
energy levy charged to their electricity bills,
from 2.05 euro cents per kWh to 3.53 euro cents.
For a three-person household using 3,500kWh per
month, this will equate to an increase of E6-10
on a monthly bill, which is roughly a 10% increase
overall. More than half of this increase in the
renewable energy levy will be invested in the solar
energy sector, despite the fact that it produces
less than 20% of the subsidized electricity.
Meanwhile, other countries such as Spain and the
UK have cut or adjusted their feed-in tariffs for
budgetary reasons. These examples show that installing
greater renewable energy capacity comes at a price
which initially remains hidden from consumers.
Policy makers must ensure that they strike the
right balance between encouraging homeowners and
local communities to invest in renewables by initially
offering appropriate financial returns, while keeping
costs to the government and consumers to a minimum.
Germany appears to be on track, with plans to generate
80% of its electricity from renewable fuels by
2050. However, the country's consumers will be
paying the price for this success.