German Renewables Law Portends Tight California Market

By Published On: May 15, 2004

Germany’s Renewable Energies Act is increasing the price of photovoltaic modules, according to California solar sales and installation firms. The combination of German demand and the decline in state rebates threatens to cause a shortage in the year ahead. “Prices of photovoltaic panels have gone up and the availability is questionable in the coming months,” said Max Hentz of Six Rivers Solar in Humboldt County, who explained that system prices have risen about 20 cents a watt in recent weeks. Photovoltaic modules still are being delivered on time, said Daniel Flanigan of Black Oak Electric in Nevada City, but deliveries may slow in the months ahead because of high demand in Germany. “The manufacturers are able to get more money for their panels over there,” he said. Germany-where more than 130,000 people work in the renewable energy field, more than in the fossil-fuel and nuclear power industries-is likely to add about 200 MW of photovoltaic capacity this year, according to David Wortmann, science adviser to Social Democrat Hermann Scheer. Scheer wrote the law as a member of the Bundestag and also chairs the World Council for Renewable Energy. Last year the PV industry was nearly at capacity, and supplies are tighter this year, said Paula Mints, senior photovoltaic analyst for Strategies Unlimited in Mountainview. In 2003, worldwide PV installation totaled 667 MW, including 36 MW in California. Japan installed 219 MW and Germany 145 MW, compared to a total of 66 MW installed in the United States. Projected U.S. growth this year is 30 percent, according to Mints, with much of it expected in California and New Jersey. Sharp Solar, for instance, has teamed up with two homebuilders in California-Clarum Homes and William Lyon Homes-to supply solar systems for up to 250 new homes. Earlier this month, a bill to require solar power in a yet-to-be-determined percentage of new tract homes built in California advanced in the state Legislature (see Circuit, May 7, 2004). Sharp, which produces solar panels in Memphis, can easily add a new production line if warranted by increased demand and sees no shortage, said Ron Kenedi, general manager of the company. Executives at PowerLight Corp. in Berkeley were unavailable for comment, according to a spokesperson, because they were on their way to Germany. ?History over the last 30 years has demonstrated the industry?s willingness to invest, given even moderate demand-side signals,? said Bob Johnson of SolarInsights, LLC. The U.S. Department of Energy estimates that it takes about one year to set up a new photovoltaic production line. In 2002, manufacturing plants in the United States produced 112 MW of photovoltaic cells and modules and shipped abroad 66.8 MW, or about 60 percent, mostly to Germany, according to DOE. German lawmakers originally passed the renewable energy law in 1991. A coalition of Social Democrats and Greens dramatically strengthened it in 2000 and renewed it again last year. The 2000 version of the law encouraged Germans to install some 300 MW of photovoltaic capacity, according to Wortmann. Under the 2004 law, German power companies must purchase renewable power from anybody who installs a solar, biomass, wind, or other renewable system and pay hefty tariffs. The German tariff for small photovoltaic rooftop systems installed this year, for instance, is 69.4 cents/kWh in U.S. dollars. The tariff will decline 5 percent a year to pressure solar equipment makers to lower their manufacturing costs, explained Wortman. Germany also gives solar system purchasers zero- or low-interest loans. By comparison, California’s net-metering standard requires investor-owned utilities to pay household solar system owners the retail power rate of 12 to 14 cents for each kilowatt-hour they feed into the grid. System purchasers also are eligible for sizable rebates ranging up to $6.00 per watt of installed capacity, depending upon their utility. However, for most state residents, the California Energy Commission set rebates through California’s three major investor-owned utilities at $3.80 per watt for small household systems beginning July 1, 2003. The rebates decline by 20 cents per watt every six months until they are reviewed in 2007. Tariffs are not the sole reason for the burgeoning success of solar energy in Germany. Electricity is even more expensive there?in part because of an ecological tax. High-cost electricity narrows the cost spread between solar energy and conventional power and can magnify incentives’ effectiveness. “California is still near the top on the effectiveness of rebates,” explained Sue Gouche, policy manager for the North Carolina Solar Center, which tracks state solar incentives in the United States. Prices for electricity are higher still in Germany and need to increase further to account for the environmental damage caused by fossil-fuel and nuclear plants, said Wortmann, reflecting what he called the dominant view of the German policy-making establishment. Looking long term, the growing market for photovoltaic energy has been stimulating investment in manufacturing capacity. The industry is on the way to doubling its manufacturing capacity, according to a DOE analyst, although to keep it going in the United States, more subsidies will be needed. “These other countries are really jumping ahead of us,” he said.

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