German solar power boom continues despite tariff cuts

FRANKFURT: Germany’s solar power systems market continued to grow strongly in September, putting Europe’s biggest economy on track for a new installation record this year and increasing pressure on the ruling coalition to curb the spiraling costs to consumers.
In September, nearly 1 gigawatt (GW) of new solar power generating capacity was installed, the energy network regulator Bundesnetzagentur said, bringing the total of new installations in the January-September period to about 6.2 GW.
Capacity grew by around 7.4 GW in all of 2010 and 7.5 GW in 2011, far above the 2.5 to 3.5 GW Berlin would like to see each year.
This prompted the government to schedule massive cuts in the levels of feed-in tariffs — which are guaranteed to be paid for 20 years to generators of solar power — the industry’s lifeblood as long as solar power is more expensive than conventional forms of energy to produce.
Boosted by even more lavish tariff incentives in the past, Germany is the world’s largest solar power equipment market, attracting industry bellwethers such as US-based First Solar, China’s Suntech, Norway’s Renewable Energy Corp. and Germany’s SMA Solar.
Bundesnetzagentur said that as a result of the strong increase in generating capacity so far this year, feed-in tariffs for new solar power installations would be further cut by 2.5 percent a month between Nov. 1, 2012 and Jan. 31, 2013.
By slashing tariffs the solar equipment industry has been forced to cut prices, while the government heads off steep rises in energy bills for companies and households, which are required by law to pay the feed-in tariffs.
Germany’s power network operators said recently that subsidies levied on German consumers to support renewable power will rise by 47 percent next year.
Chancellor Angela Merkel’s decision to abandon nuclear power following last year’s Fukushima disaster has led to a growing need for alternative energy sources, causing higher charges on consumers’ energy bills.
German media have highlighted the cost to households of Merkel’s decision last year to speed up the switch to renewables and switch off nuclear plants earlier than planned.
Opposition parties have accused the government of letting private consumers bear the brunt of the costs, after it exempted energy-intensive heavy industry from green energy and network usage tariffs.
Data from energy industry group BDEW showed that German power production from solar generation rose nearly 51 percent year-on-year in the first nine months of the year.
Solar output in Jan-Sept amounted to 24.9 billion kilowatt hours compared with 16.5 billion in the same 2011 period, it said.
September solar production alone, at 2.9 billion kWh, exceeded every month of 2011, after the volume in May 2012 had represented an all-time record of 4.0 billion for a single month.
Wind power production in Jan-Sept. 2012 amounted to 35.0 billion kilowatt hours compared with 32.5 billion in the same 2011 period, the BDEW data also showed.
The figures resulted from favorable weather patterns as well as rapid additions to solar production facilities, bearing out Germany’s drive to rely more on energy alternatives to fossil fuels burning.
Renewables have grabbed a share of 26 percent of the power mix in Jan-Sept. But BDEW said the full-year figure would be lower in 2012 as sunshine hours drop in the autumn.
New solar capacity additions in January through September were 6.2 gigawatts (GW), the federal network agency said recently.
The data put Germany on track for a new installation record this year, increasing pressure on the government to curb the spiraling cost to consumers from solar subsidies.
Solar capacity grew by around 7.4 GW in all of 2010 and 7.5 GW in 2011, far above the 2.5 GW to 3.5 GW Berlin would like to see each year.
Also, thermal power producers are increasingly skeptical about the increasing wind and solar installations as they are required to scale back production from gas-fired and coal-fired plants whenever there is a lot of renewable energy in the system.
In a separate development, China opened a second front in a solar power war with Europe recently, lodging a complaint with the World Trade Organization to challenge policies that Beijing argues favor firms in Italy and Greece.
Days after warning that it could put punitive tariffs on European Union exports of solar-grade polysilicon, a key raw material for solar power, China said Italy and Greece broke WTO rules.
The two EU states offered a higher electricity price to solar power producers that used mainly locally sourced components, it said.
It appears to be the same complaint that the EU and Japan have brought against Canada — with the WTO expected to rule against Canada.
“The Chinese government has the right and the responsibility to fight for a fair international trade environment for China’s solar industry,” Chinese Ministry of Commerce spokesman Shen Danyang said in a statement.
Shen said all countries should strengthen industry cooperation and eschew short-term “protectionist” measures.
By lodging its complaint, China triggers the formal process for a WTO dispute and, if talks with the EU fail to resolve the issue, after 60 days it could ask the global trade body to adjudicate.
Solar power has struggled to compete with other fuels without government support, a fact that drove oversupply in the industry, a collapse in profitability and accusations of governments cheating on trade rules to protect their own manufacturers.
Awash with spare inventory, Chinese firms slashed prices 30 percent this year, exacerbating European suspicions that Chinese export prices are set deliberately low to torpedo their rivals in the EU, the world’s largest market for solar products.
About 60 percent of China’s exports of solar panels and components went to the EU in 2011, generating 21 billion euros ($ 27 billion) and accounting for 7 percent of all Chinese exports to the region.
Chinese producers include Yingli Green Energy, Suntech Power Holdings Co. Ltd. and Trina Solar Ltd.
A group of 25 European companies, led by Germany’s SolarWorld, filed a complaint with the European Commission in September, claiming Chinese rivals were unfairly benefiting from illegal subsidies, helping to stimulate production to more than 20 times Chinese consumption and close to double global demand.
The US leveled steep final duties on Chinese-made solar products in October, a move Beijing warned would provoke greater trade frictions in the new energy sector.
The EU is considering slapping similar punitive import duties on suspected under-priced Chinese solar panels, by far the biggest import sector ever targeted by such an investigation.
Although such punitive tariffs — whether in China, the EU or the US — could alleviate the pain for the companies involved, they could eventually drive up the cost of solar power, making it a less attractive energy source for consumers.