Solar Subsidies Raise Electric Prices in Germany

Solar Subsidies Raise Electric Prices in Germany
Solar Subsidies Raise Electric Prices in Germany

"Feed-in tariffs" is a fancy name for price supports - the kind that have produced agricultural surpluses and large wealth transfers to farmers in the US for almost a century. Europe got into feed-in tariffs early. As far back as 1990, Germany enacted a feed-in tariff that guaranteed providers of solar electricity a price well above market level. Consequently, it has been very easy for solar producers to make a profit. The idea was to foster domestic industries but much of transfer has ended up going to Chinese firms.

The less obvious downside, however, is that consumers end up paying more for electricity. The high solar prices are averaged in with all other sources and consumers end up paying the bill, both as taxpayers and consumers.

In the graph above, the Institute for Energy Research has charted the comparative impact of feed-in tariffs in the United States and Germany. The blue bar is the feed-in tariff and the red bar is the overall price of electricity in cents per kilowatt-hour (kWh), with the scale on the left.

The United States pays an average of 11 c/kWh and has no national feed-in tariff, although California, Florida, Hawaii, Maine, New York, Oregon and Vermont all have state variations. Germans pay 35 c/kWh for their electricity and a 25 c/kWh feed-in tariff for solar. As IER notes, Germans pay more on the feed-in tariff than American pay for electricity.

Although IER does not say it outright, the suggestion that the Germans pay high electrical prices because of the feed-in tariff. They support this by noting that the only country that pays more for electricity is Denmark, which has splurged even more on feed-in tariffs for wind. Several comments on the IER website, however, argue that solar's contribution is too small to have such an impact. Germany did report that that it is got 26 percent of its electricity from renewables in the first quarter and solar was 21 percent of that, making it 5 percent of all electricity.

IER argues that the German solar industry is about to suffer now that Germany has found it too expensive to maintain the feed-in tariffs. They say Spain has had a worse experience, with $50 billion in wind and solar-related debt now floating around the country. Spain's solar bubble, which soon popped, has played a large role in its overall debt crisis as well.

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