Promoting Solar Energy In Germany: Promoting Solar Energy In Germany Any Lessons for San Diego? Chris Gadomski www.smidirect.net


What’s going on in Germany?: What’s going on in Germany? Because of renewable energy law passed in 2000 the 12.5 percent quota set for 2010 already met. New targets… by 2020: generate 20% of electricity with renewables by 2030--45% Environment Minister Sigmar Gabriel Source: Renewable energy sources Act progress report 2007


PV Booming: PV Booming solar electricity generation increased from 64 million kWh in 2000 to 2 billion kWh in 2006 pv now produces 0.3 % of Germany’s electricity supply.


Precarious Energy Situation: Precarious Energy Situation Energy security--Germany imports 76% of its natural gas, 44% of which comes from Russia Green environmental pressure to move away from heavily polluting lignite for 25% of electrical power generation 17 nuclear plants provide 25% of electricity. Federal commitment to shut them down by 2022 still on the books


Renewable culture...A Wind Success: Renewable culture...A Wind Success


Three determinants for PV market development: Three determinants for PV market development


Insolation levels are comparably low: Insolation levels are comparably low


Reasons for growth—Public Policy: Reasons for growth—Public Policy Renewable Energy Sources Act (EEG) of 2000, revised July 2004 Established ambitious goals: 12.5% share of renewable electricity generation by 2010 20% share by 2020 High feed-in tariff is key--many different tariffs, all however are high


Impact of New Feed-In Tariff—Immediate Results: Impact of New Feed-In Tariff—Immediate Results


Feed-In Tariff described: Feed-In Tariff described The renewable electricity that is generated is bought by the utility at above market prices. For example, if the retail price of electricity is $.10/kWh then the rate for green power might be $.40/kWh. The difference is spread over all of the customers of the utility.


Germany’s feed-in tariff--a solar company’s dream: Germany’s feed-in tariff-- a solar company’s dream Introduced in 2000 at a rate of Euro cents (Ec) 50.6 per kWh Developers lock in rate for 20 years low interest financing initially also available Planned annual decrease of 6.5% for “open space” systems


Feed-in tariff under EEG 2004 (Ec/kWh): Feed-in tariff under EEG 2004 (Ec/kWh) Year 2004 2005 2006 2007 Roof 57.4 54.53 51.8 49.71 +30 kw 54.6 51.87 49.28 46.82 +100 kw 54 51.3 48.74 46.30 Facade bonus 5 5 5 5 Open space 45.7 43.42 40.6 37.96 Rates reduce by 5% a year, 6.5% for open space Source: Lehman Brothers report citing Greenpeace


Also important to remember…: Also important to remember… Annual “degression” does not apply to installed projects…only to new projects coming online--once you lock in, rate good for 20 years Euro is at all time high against the US$… On October 19, 2007, Euro hit $1.43 So 2007 feed-in rate for residential rooftop installation is equivalent to $.71 kWh How does that compare with your net metering rate?


German IRRs appear attractive: German IRRs appear attractive Hours 700 1000 Size 3000 w 3000w Cost (e/w) 5.05 5.05 Total cost 15,150 15,150 Output kWh 2,100 3000 2005 Tariff .5435 .5435 Annual income 1,145 1,636 IRR 4.3% 8.8% Source: Lehman Brothers Report July 2006


So, no wonder then, Germany Leads in Global PVInstallations--2006 capacity reached nearly 1,800 MWp: So, no wonder then, Germany Leads in Global PV Installations--2006 capacity reached nearly 1,800 MWp


Other benefits: Other benefits Greed—German market moved from being environmentally green to economically green Greed again--Billions of euros invested in new production, short term economic gains may lead to capacity increases—necessary for future price reduction R&D has led to unexpected substantial advances in production leading to costs falling substantially. Jobs created—a tonic for unemployment


Other results…: Other results…


Lessons for San Diego???: Lessons for San Diego??? Is our energy situation precarious? Are we promoting solar the best way we can? Are we leaving money on the table?


California Incentives: California Incentives Rebates steadily declining from $2.80 per watt by 10 percent per year through the duration of the program, etc. Will this strategy continue to drive the market? What is the IRR of your installations? Source: CPUC, CSI


Think about the marketing-: Think about the marketing- What is better? Revenue, cost or tax incentives. Revenue incentives will drive larger installations—think about greed! Net metering is an incentive to site smaller installations-avoid minimum payments to utility. When I am ahead, no incentive to save.


Separate the issues: Separate the issues


Feed-In Under Consideration: Feed-In Under Consideration


Washington State Feed-In Tariff: Washington State Feed-In Tariff


Thank you!: Thank you! I would like to acknowledge and thank the research efforts of my graduate students at NYU: Andres Castellanos, Doug Horn, Matt McDermott, Abha Singh, Warren Wilczewski Chris Gadomski SMIdirect 7825 Fay Avenue, Suite 200, La Jolla, CA 92037 858.605.0688 chris@smidirect.net