Jigar Shah: “Too Much Solar in Germany”

Nov 04 2012 Published by under European and German energy law

I had the honor and pleasure of discussing a bit with Jigar Shah right now on Twitter. He started out with this:

On the German FIT, I agree that Germany installed too much solar, they would have reached grid parity with 10% of the solar amount

I was slightly surprised. Shah was the CEO of the “Carbon War Room”. If he knows we are in a war on carbon, with potentially all life on the planet at stake, how can there be something like “too much solar”?

After some discussion, he followed up with this:

I agree but had Germany adopted California’s volume based incentive reduction its moral duty would have been achieved for 50% less

I am not familiar with the California program, so I had a look.

First off, they only got to 1.4 GW until now, with much better solar resources than Germany. That does not impress me as a model worth following. Maybe their program is worth some attention once they get at least 10 GW, some time after 2020 at current pace.

I then looked at the handbook the California government published to find out what “volume based incentive reduction” is.

I am not sure I have understood that system very well. Looking at the explanation at page 5, it looks like they have radically reduced the benefits at ridiculously low levels. No wonder they don’t get anywhere compared to Germany.

But the basic idea seems to be to reduce the benefits as more solar gets installed.

That is of course also happening in Germany, though at a very much larger scale. Right now reductions are 2.5% each month, because installations still are at healthy levels.

And, of course, no one knows what would have happened in an alternative universe where Germany had adopted the California policy. Possibly it might have been cheaper.

But, seriously, who cares? The cost of German solar feed-in tariffs of about 2.5 euro a month per capita is completely irrelevant in comparison to the cost of unchecked global warming. And you need a magnifying glass to spot it in the average households’ consumption.

What we do know, however, is that Germany has beat California by a factor of over twenty in installation records. And that is what has brought the price down to levels where solar is starting to displace coal in China, where it counts most.

4 responses so far

  • Outbound says:

    Jigar is saying Germany should have adopted a smarter degression policy sooner. This is absolutely true. Fast solar isn’t a good thing because it tends to create steep adjustment cycles which damage and in some cases destroy the long term market. Germany made it out of the woods because they’ve got a fabulous economy that’s been helped along by the cheap Euro.

    We’ve seen many markets that have burned up due to mis-priced FiTs. The widely shared expectation among analysts is that Japan’s FiT program is headed for a big crash. As soon as electricity prices start to rise the opposition will say the FiT is responsible. This opposition’s argument will have some truth to it because the billions of dollars that investors are chasing right now comes from electricity bills. It’s much smarter and more responsible to build your FiT program so that it steps down the rates based on installations – these steps have to occur on a monthly basis.

    Japan is in a strong position because you have low interest rates and high electricity bills. It’s relatively easy to imagine how you could aggressively step down your FiT program in a way that minimized the costs and achieved sustainability sooner.

  • Karl-Friedrich Lenz says:

    Actually I agree with him if that’s what he wanted to say, and I indicated as much in my last response at Twitter. I still think speed is more important than cost, though. Eventually all energy will come from renewable. The trick is to make it happen fast enough to make a large difference with climate change.

    If you compare with Japan, it is much easier in Japan to adjust faster, since the tariffs are set by delegated legislation. The minister of economy can decide on changing them without a Parliament decision.

    The opposition in Japan of course doesn’t wait until the surcharge goes up. Yomiuri came out against the feed-in tariff on day two of its entering into force.

  • Outbound says:

    You can’t get speed unless you pay close attention to costs. You have to realize there’s a finite amount of money. If you reduce the costs of each increment of production you can increase the speed.

    Jigar frames this rather well:

    “By 2016, the last year of the 3o% federal investment tax credit, the US solar industry will be installing 4X the megawatts and employing 2X the number of people. This can only happen if we can find over $7 billion in tax equity – while the available tax equity market is around $5 billion. If we can phase out our federal tax credit from 30% to 10% by 2017, we could live below the $5 billion cap and continue our rapid growth rate.”

    Do you understand what he’s explaining there? In his example tax equity is a sort of currency. And he’s explaining that smaller subsidies will actually lead to more installations.

    Here’s another guy explaining the same basic thing.

    http://www.solarsouthwestflorida.com/how-fpl-can-improve-the-solar-rebate-program/

    There’s only so much money in incentives, tax equity and actual cash. It needs to be used efficiently. People think we can do everything like do PV on homes, schools, huge farms, off-shore wind, CSP, tidal etc. This isn’t true at all. We get the most done if we concentrate on the most cost effective renewables that have a chance of out-growing subsidies in the near-term. The list is essentially limited to distributed PV, off grid PV and wind. CSP doesn’t make the cut nor does off-shore wind.

  • Karl-Friedrich Lenz says:

    I have looked at your link. That is about a system quite different from feed-in tariff, as is Jigar Shah’s comment above.

    These systems are not effective to get the solar rocket to start, as is clear from the way Germany is speeding far ahead of the United States.

    And, of course, if you pay higher tariffs in a feed-in tariff system without a cap, you will get more and faster deployment. That’s just common sense.

Leave a Reply


*