For Germany, one of those ways has been encouraging the uptake of renewable energy. But now, the plummeting price of solar panels has unleashed a new round of, how shall we put it, chaos.
Germany plans to reduce government subsidies supporting solar power by up to 30 percent within a year because higher-than-expected demand has made the scheme far more costly than authorities initially expected.
At first glance, that seems a boon to the solar business and a vindication of those subsidies – they seeded the market and now the market can proceed on its own. But not so.
German companies producing solar panels, already under pressure from stiff competition from new manufacturers in China, protested against the new cuts. Several thousand employees of about 50 firms in the segment held protest rallies across the country, the German Solar Industry Association said.
Now, this could simply be a case of not wanting the money spigot turned off – that’s not unusual. The growth of solar energy in Germany in impressive but seems containable: installations ran to 7500 megawatts in capacity last year, more than double the 3500 megawatts the government expected to see (and based its subsidy system around.) Remember that solar power cannot achieve 50 percent of its capacity rating, so those numbers are a little deceptive on their face. Nuclear energy facilities, by contrast, achieve above 90 percent of its capacity rating routinely.
Beyond these issues, the subsidies have put considerable pressure on the price benefit from the installations, essentially erasing the savings for ratepayers:
Installations of solar panels have boomed due to feed-in tariffs, generous subsidies which have mounted into a growing burden passed on to energy consumers.
Clearly the economics of solar power have gone haywire, but how?
Here’s the beginnings of an answer, from Morningstar:
Looking forward, we expect module pricing will begin falling within the next month, and reiterate our projection that module prices will be in the mid-$0.80s by summer. At such pricing levels, even a company with best-in-class production costs will not be able to turn a net profit this year. We reiterate our belief that for now long-term investors should steer clear of the space.
That’ll help, won’t it? Other financial gurus take equally dire views. The prediction is that there will be a wave of bankruptcies followed by a retrenchment. Here’s the bankruptcy part.
That will inevitably lead to more bankruptcies in a sector already laboring under 100 percent or more over-capacity and where leading names have filed for insolvency, including U.S.-based Evergreen Solar and Solyndra, and debt restructurings such as the one at Germany's Q-Cells.
And the retrenchment part.
But further cost cuts across the supply chain - and in particular the upstream manufacturers of raw solar-grade silicon - will sharpen the technology's competitiveness and see it mount a serious attack on offshore wind, shaking up the relative outlook for emerging technologies.
I’d add here that this shakeout holds the potential to strangle the solar panel business in Germany in the face of competition from China – what those protestors are rightly worried about - and losing a nascent business sector in a nascent technology would be an unquestionably poor outcome. But what about that serious attack on offshore wind?
If solar economics can leapfrog those of offshore wind, this poses the question: why invest in such a complex, moving piece of machinery as an offshore turbine, stationed in an unpredictable weather environment with massive servicing costs, rather than a simpler, static and more proven solar panel array?
One answer is that there may be more limited space for solar panels in the best, south-facing spots compared with the available coastlines suited for offshore turbines.
So – maybe. Note that Germany is far from being a sun-and-fun kind of place – this argument for solar is actually more solid for the United States.
I may be wrong, but this sounds like an instance where a business gambled that it would have a substantial product to sell but has ended up with the equivalent of a widget – and what company, especially one with considerable worker needs, can survive with a single widget as its product line?
This will shake out. Watching it do so is likely to be incredibly painful, especially in Germany, and a real blow to the solar energy business just when, ironically, it is gaining traction. In the meantime, chaos – Germany has blown a giant hole into its energy outlook.
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You win some, you lose some:
Kuwait has decided to abandon civilian nuclear power production.
Abandon in this case means not build. Kuwait thought it might build four reactors by 2020 but has changed its mind.
We wrote about Kuwait’s plans two summers ago, based on this bit of news:
Kuwait is experiencing almost emergency conditions after power consumption hit an all-time high for the third day in a row at 10,921 megawatts at 2:30 pm, which is around 30 megawatts short of maximum production capacity. The record consumption was triggered by record temperatures that reached 51 degrees Celsius at Kuwait Airport, 50 degrees in Kuwait City and as high as 53 degrees at the Abdali border post with Iraq.
53 degrees Celsius is 127 degrees Fahrenheit. Kuwait asked its neighbors for help but didn’t get much.
So, this is Kuwait:
About a quarter of Kuwait's power is generated from gas. The rest is from oil. Besides the exorbitant cost, the use of fuel oil has a major environmental impact and Kuwait City is often shrouded in a brown haze.
I’ve lost track of who lost what here.
Neighborhood as solar array in Germany.
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