January 20, 2012
By: Craig Morris
Blinded by the German Mirror
On Wednesday, Germany's Der Spiegel published a critique of the country's solar policy. The magazine, whose name means The Mirror, claims that Germans support solar blindly, but the weekly has a history of blind reports on renewables itself.
Der Spiegel is one of Germany's main news weeklies, equivalent to Time or Newsweek in the US or the Economist in the UK. Strangely for a country where popular and political support for renewables has led to such impressive results on the market, Der Spiegel continues to publish silly, populist criticism instead of productive, insightful analyses. The recent article entitled "Reevaluating Germany's blind faith in the sun" is the latest example.
Mind you, I don't mind criticism of the renewables sector. Quite the contrary, I like to think I'm pretty good at it myself. For instance, Der Spiegel paraphrases German environmental expert Olav Hohmeyer, who says that the surge in photovoltaics in Germany "jeopardizes acceptance of renewable energy even before the energy transition has truly begun" ("energy transition" is Spiegel's translation of the German Energiewende, which specifically means the switch to renewables, ed.).
I share his concern. In December 2010, Hohmeyer was a signatory – along with a large number of other prominent German energy experts – to an "Urgent call by German energy researchers to save the Renewable Energy Act" (in German here), which specifies German feed-in tariffs and gives renewable power priority on the grid. One of their main concerns was the PV boom:
"The main purpose of the Act was never to have the most expensive type of renewable power grow the fastest. If the PV sector grows too quickly… public acceptance of the Act and of renewables overall could be endangered."
But to fully understand what we are talking about, we need to focus on some figures – not the retail power rate or the feed-in tariffs for PV, but installed PV capacity in relation to peak power demand. At the end of 2011, Germany had installed some 25,000 megawatts of photovoltaics, 15,000 of it installed in 2010 and 2011 alone. The country has peak power demand around the end of November at 80,000 megawatts, a figure that falls towards 60,000 megawatts in the summer and may even drop close to 50,000 on summer weekends and holidays.
No one in their right mind would argue that we can continue to install 7,500 megawatts a year given those figures for peak power demand. Think about it: 20 years of that level (solar panels currently have 25-year warranties) would lead to 150,000 megawatts of installed capacity – nearly 3 times greater than peak demand in the summer. Even if that 150,000 megawatts of solar only generally peaked at 100,000 megawatts of actual production in real-world circumstances, we would be throwing away a lot of power, and all of our other power generators – including wind turbines – would not be useful.
Growth at that rate is madness, so expect Germany to try to curb its PV sector.
Now compare that to the situation in the US. According to these figures (PDF), peak power demand is the reverse seasonally in the US; it peaks in the summer, not the winter, partly because of air conditioning. And it peaked at some 768,000 megawatts in 2010 for the contiguous US. The US currently has less than 4,000 megawatts of PV installed, equivalent to 0.005% of peak summer demand – compared to around 40 percent in Germany. For the US to face similar challenges as Germany in terms of installed PV vs. peak summer demand, the US would need more than 300,000 megawatts of installed PV.
So the problem is that an installed solar ratio equal to 40 percent of peak summer demand will probably only give Germany four percent solar power in its electricity supply in 2012. The challenge is to increase the share of solar to 10 percent, and Der Spiegel does not tell us how we might do that. But the US is light years away from the problems Germany faces – Americans would have to start installing 15,000 megawatts of PV a year first, roughly 8 times the level of 2011.
Solar competes with what?
Der Spiegel doesn't tell us any of that. Instead, we read that "subsidies have made the German manufacturers lethargic. They invest only 2 to 3 percent of revenues in research and development, compared with an average of 6 percent in the auto industry and about 30 percent in biomedicine."
Up to then, I wasn't aware that the solar sector was competing with the automotive industry or biomedicine, so I checked on First Solar, the former market leader from the US, to see what its R&D ratio was. Based on the figures in its annual report for 2010 (the latest one available), it seems that the firm invested 3.7 percent of its net sales from 2010 in R&D, compared to 3.8 percent in 2009 – but only 2.7 percent in 2008. Despite its clearly higher R&D ratio, First Solar nonetheless failed to defend its market leadership, having been passed up by a Chinese manufacturer.
It would seem, then, that the R&D ratio is not the main factor. Remember Solyndra? That firm famously went bankrupt after receiving a loan worth $500 million, but as Stephen Lacey recently pointed out in The Guardian, Chinese firms are on a completely different market, having received some $30 billion in practically interest-free loans from their government in 2010 alone. Therein lies the crux. But while cell and panel manufacturers near the end of the value chain are struggling in Germany, further up the value chain production plant equipment suppliersin Germany still command nearly half of the global market, as Renewables International reported today.
Feed-in tariffs still the best option
What Der Spiegel does not tell us is that the "subsidies" that allegedly made German firms lazy are almost entirely feed-in tariffs that are open to all PV firms domestic and foreign. Why did they make German firms lazy but not the Chinese? In contrast, these loans and loan guarantees that the US and Chinese governments give out are cases of public officials picking winners. German feed-in tariffs leave decisions about how much money goes to what firm up to consumers, i.e. the market.
And while critics of German support for PV say it is pointless for such a cloudy country to have so much solar, it turns out that Germany pays some of the lowest prices worldwide for solar – almost half as much as Americans pay. As I pointed out at Renewables International last year, solar cost 60 percent more in the US than in Germany in 2010, and Stephen Lacey provided the figures for Q3 2011 10 days ago, with an installed watt of PV costing $2.80 in Germany compared to $5.20 in the US. Clearly, the drastic reductions in German feed-in tariffs have simultaneously brought down cost and kept the domestic market growing.
Most importantly, while Der Spiegel complains of the cost impact of solar on power consumers, Americans should keep in mind that roughly 50 percent of solar power payments go to homeowners and small investors, as Renewables International reported. In contrast, solar is almost exclusively big business in corporatist America. That may also be one reason why Germans are so willing to accept the increases in the retail power rate related to green power that Der Spiegel is trying to scare us with.
Keep in mind that PV is already cheaper that concentrated solar power (CSP), will soon undercut offshore wind once and for all, and it could even be competitive with onshore wind power by the end of this decade thanks to feed-in tariffs – at least in cloudy Germany.
The price ain't right
Der Spiegel doesn't tell us any of that. Instead, we read that investments in PV are a "waste of money at the expense of climate protection" and "a bad investment… from the standpoint of the climate." Here, the magazine quotes two economic experts talking about how to avoid carbon emissions. But solar panels produce power; reducing carbon emissions is a side effect, not the main purpose. While Der Spiegel claims that insulating a roof reduces carbon emissions at one percent the cost of solar, we then still need to figure out where to get our electricity from.
The article argues that we could get our power from hydro at a sixth of the cost of PV, from biomass at a third – and from wind at a fifth. But the article does not explain that Germany has very little potential to expand its hydropower, and efforts to expand biomass production are meeting with increasing resistance in the general public. And putting all our eggs in the wind basket would just produce surplus wind power -- what we need is a mixture of complimentary power sources.
But what I liked the most was Der Spiegel's sudden support for wind power. Over the past 10 years, the magazine has repeatedly published absolutely brainless, misleading assessments of wind power, and in my book I spend three entire pages thrashing the magazine's laughable coverage of the wind sector up to 2005, when my book was completed.
But not everyone at Der Spiegel is blind when it comes to renewables. In 2007, the magazine published a special issue on energy, and one of the 19 books listed as recommended reading was mine. Touché, I'd say. Obviously, some people at Der Spiegel understand what needs to be said. Too bad this one article misses the point. (Craig Morris )
Source: Craig Morris | Renewables international The Magazine