The Mediterranean Photovoltaic Power Plant Revolution

Photovoltaic (PV) power plants could be supplying 26 million households in the Mediterranean with electricity by 2020, the European Photovoltaic Industry Association (EPIA) has said. Boosted by a new law that gives generous financial incentives to solar electricity producers, PV plants are being built in Italy and Greece at a phenomenal rate.

At the moment, Germany dominates the solar market in Europe with a 90 percent share. But strong growth in other European countries, especially in southern Europe, will see Germany's share fall to about 50 percent in the next few years," Christoph Wolfsegger of EPIA told RenewableEnergyAccess.com.

Wolfsegger noted the photovoltaic market is expanding so fast in Italy and Greece because both countries introduced a feed in tariff (FIT) model similar to Germany's. The feed in model guarantees producers a fixed price for electricity generated from photovoltaic plants.

In Germany, the feed in system of payments was introduced in 2000, and revised in 2004 to cover the full costs involved in producing solar electricity, sparking a boom. Germany will have about 900 MW of installed solar capacity by the end of 2007, according to the German Solar Industry Association (BSW)—almost 20 times as much as in 2000 when there was just 44 MW installed capacity.

The German government currently offers a remuneration of about 49 euro cents for a KW/h photovoltaic electricity.

"The German renewable energy law is a success story. It has developed a mass market for solar electricity and a highly competitive industry," Carsten Körnig, Managing Director of BSW, told RenewableEnergyAccess.com

Spain introduced a feed in tariff similar to Germany's in 2003 that also sparked a rapid expansion of its photovoltaic market-there was 10 MW of new capacity installed in 2004 alone.

"The feed in model has worked wonders in Germany and also in Spain. We are already seeing the beginning of a similar upsurge of growth in Italy and Greece," said Wolfsegger.

The installed solar capacity in Italy could increase tenfold this year to reach 100 MW this year, the BSW predicted. The Italian government has said it aims to have 3,000 MW of installed photovoltaic capacity in place by 2015.

Under the new Italian renewable energy law, the "conto energia"—passed in February 2007—as much as 49 euro cents is to be paid for every KW/h of photovoltaic electricity. Payment is guaranteed for 20 years.

Körnig said that the costs of photovoltaic power plants in Italy could be recouped in as little as 8 to 12 years because of the structure of government subsidies and the Italian electricity market. As a result of the high price of electricity in Italy, photovoltaic electricity prices do not have to fall much to become competitive without subsidies.

The BSW predicts that the solar markets in Greece will also grow rapidly, albeit it from a lower baseline than Italy.

In 2006, the Greek government passed a renewable energy law offering as much as 50 euro cents for each KW/h of electricity from photovoltaic plants with 100 kW of peak power output or less that are located on islands.

The government has said it wants installed photovoltaic capacity increase to 840 MW of by 2020—640 MW on the Greek mainland and 200 MW on the islands.

But Körnig warned the booming photovoltaic industry against complacency. He said that long-term success depended on keeping the end price for consumers low.

"System prices in Spain are much higher than in Germany and consumers there have to pay more," said Körnig. "The renewable energy law has helped keep prices down in Germany and that is one reason why it is now the world's number one solar market."

The German tariff model foresees a steady year on year decrease in the amount paid for photovoltaic electricity to encourage companies to develop new technologies, find economies of scale and so make solar electricity competitive.

"We expect there will be grid parity for photovoltaic electricity in Germany this decade," said Körnig.

The German photovoltaic industry is already benefiting from the boom in southern European countries with bursting order books.

The EPIA expects turnover in the photovoltaic industry to increase from 9 billion euro this year to 300 billion euros by 2030—and predicts that photovoltaic power plants could be supplying up to 9.4 percent of all the world's electricity by 2030.

The Swiss bank Sarasin and the Roland Berger Strategy Consultants estimate that the global photovoltaic market will grow by about 20 percent each year.