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Germany's green energy sector: can it grow without subsidies?

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It is a good deal for the company, and people outside Feldheim are noticing. The solar power industry is booming. The government predicted an increase in solar power installations in 2011 with a total output of 3.5 gigawatts, but actual production far exceeded that prediction: at the end of the year, Germany had produced an additional 7.5 gigawatts of solar energy.

The feed-in tariff is regulated by the Renewable Energy Bill and financed not by the state budget, but by German consumers. A levy dedicated to the support of green energy is added to the electricity bill of each household. It rises with the number of solar panels and windmills out there, even though the government tries to adjust the tariff downward at regular intervals. Last year, the average household paid €130 ($171) extra to foot the green bill.

“The production of solar panels has become much cheaper in recent years,” says Claudia Kemfert, energy expert with the German Institute for Economic Research in Berlin. “Manufacturers and providers can’t reasonably ask for subsidies much longer. But they are not competitive yet, compared to conventional energies.”

Overwhelmed by the green boom and under pressure from the conventional electricity utilities, the government has slammed the brakes on subsidies. Hardly a day goes by now without Economy Minister Philip Rösler asking the renewable energy sector for restraint in its demand for financial support. The feed-in tariff will now be adjusted every month rather than every six months, and subsidies for solar installations are scheduled to end in 2017 – five years before Germany shuts down its last nuclear reactor.

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