Unlocking Your Market Potential

Seminar Report on the German Solar Market,
and Implications for US Renewable Energy Policies.
San Francisco, June 16 2009

Hosted by the German American Chamber of Commerce and PG&E.


With an entire day devoted to the presentation of current solar technology, costs and benefits compared to other energy sources, environmental concerns, and government policies, the day could best be summarized as an attempt to answer one key question: Why is there more solar capacity deployed in Germany than in the US?

Event write-up by Keith Rayner

The land area of the US is 26 times larger than Germany, and the intensity of solar radiation per square meter is about two to four times that in Germany, depending on the region. With a US population of over 300 million compared to Germany’s 82 million, there are plenty more residencies, businesses and land areas where consumers and corporations can install solar panels. However, in 2008, Germany’s total installed power produces around 5,300 MW at peak output, compared to the US with around 1,100 MWp. Otherwise stated, per capita Germany is 17 times more productive than the US.

So why is the US is not taking advantage of this natural resource as much as some other countries?

Primarily it’s economics. Prices for natural gas and oil are higher in Germany than the US, in part because the US has a domestic supply of these resources, as well as relatively cheap hydroelectric power.

Energy policy and prices in the US are largely determined state by state and by local utilities, and some differences in solar deployment just within the US can be explained by variance in local energy costs to the consumer. So if solar energy is cheaper than other energy sources, generally you’ll see more solar production deployed.

However, the major influence on the balance between the price of solar energy and other energy sources is governmental policy. Taxation on gasoline is much higher in Germany than in the US, making solar more attractive. But governments that wish to support renewable energy can support solar in more direct ways.

One form is government incentives for the installation of solar, in the form of direct grants or rebates for solar installations. Here the taxpayer initially foots the bill.

The government can also set the price, called the feed-in tariff (FIT), at which solar energy is purchased from individuals and commercial concerns. The higher the FIT, the more attractive solar investments become. Consumers pay for this energy as they use it, but it can represent an indirect tax if energy prices are raised as a result of a high FIT.

German incentives for solar and their FIT are far higher than in the US, and in addition US individual consumers who produce their own solar energy are only allowed to net out their total energy bill to zero. So here’s are clear reasons why solar is more widely installed in Germany.

Recent increases in incentives and higher FITs in California have spurred solar growth in the state. Government can also go one step further and mandate that utility companies produce or purchase a certain amount of energy from solar and other renewable energy sources (RES).

Detractors of government intervention in solar energy pricing point to the artificial disruptions in the normal economic supply and demand that result in boom and bust cycles. A recent example often cited: High FIT levels in Spain resulted in a rapid growth in installations in 2007, resulting in PV scarcity and high prices. With enough capacity installed, Spain then placed a national production cap on solar, and lowered the FIT, resulting in oversupply and job losses in the industry.

But governments are not just thinking in economic terms, and along with many consumers, are looking at broader issues. The environment is a huge concern, above all the realization that burning fossil fuels increases the greenhouse effect and global warming. Deriving energy from solar and other RES will reduce global warming and help avoid environmental catastrophes such as radical climate change and raising sea levels.

Are Germany and other European countries more sensitive to these issues than the US? With a smaller land area, denser population, and coastal areas threatened by rising sea levels, European countries perhaps feel more threatened than the US where abundant land and natural resources may seem to provide a buffer against global climate change.

But governments also see that solar power is a domestic resource, avoiding dependence on foreign supply.

And looking longer term, it’s obvious that current fossil fuels and nuclear energy are running out. Taking nuclear energy as an example, uranium reserves are limited and at current consumption rates will be exhausted within 50 years, according to the International Atomic Energy Agency (IAEA). New production capacity, new explorations, and more efficient reactors might extend this lifespan, but increasing nuclear energy output by building new power plants would shorten the timeframe. By any measure nuclear energy is a short-term proposition, and the same is true for gas and oil reserves. Coal will last somewhat longer, but with the developing countries increasing their energy consumption, the rate of fossil fuel depletion will also accelerate.

Governments have the power to act on these issues, and policies that promote RES, while expensive in the short term, will help avoid much higher costs further down the line.

Whereas PV is currently an expensive way of producing electricity, cash spent on research will increase the efficiency of solar panels. Larger scale production will also reduce the cost of manufacture. Job creation in renewable energies provides a boost to the economy.

Other points to consider: Solar generation takes place during the day, at peak usage hours. This also applies to solar cooling – energy from solar can drive cooling systems for air conditioners.

Solar thermal is another way of using solar energy. Passive heat absorption systems heat water for domestic use, saving electricity.

Of all renewable energy sources, solar is the most abundant, with wind power a distant second. Other sources such as biomass, hydro, geothermal and wave energy make up the rest.


Whereas solar energy is currently relatively expensive, it makes sense to push towards renewable energy use. As Fatih Birol, chief economist IEA, said in 2008: “We should leave oil before it leaves us“. Research into making solar technology more efficient, and lowering production costs, will hasten the crossover point where solar becomes cheaper than fossil fuel. And finally we need to act on global warming by replacing fossil fuel use with renewable energy resources of all kinds.

Write-up: Keith Rayner, Kemarra Inc: June 2009


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