“Photovoltaics in Germany make as much economic sense as growing pineapples in Alaska,” Jürgen Grossmann said in 2012. He was the head of utility giant RWE at the time, and his remark summed up the feelings of many power executives who defended their business model, which relied on burning coal and gas, and nuclear power.
It’s a lingering prejudice. No one doubts that solar power is environmentally friendly, but economical? In a country with so many overcast days a year? Germany, Europe’s top solar energy producer, has spent more than €70 billion ($80 billion) in state subsidies since 2000 to develop the sector, and power consumers are fed up with footing that bill.
But now solar power appears on the brink of becoming commercially viable thanks to a rise in electricity prices and a dramatic fall in the price of solar panels.
Handelsblatt has learned that EnBW, the country's third-biggest power utility, plans to build a solar park that won’t just be Germany’s largest — it will also be the first that will not require any taxpayer's money.
“We would be building the biggest solar park in Germany at present,” said EnBW technology chief Hans-Josef Zimmer. “And it will do without subsidies.”
Zimmer said the new facility, enough to provide electricity for 50,000 households, could go online as early as 2020. He declined to reveal the investment costs, but industry sources estimated they will amount to between €120 million and €150 million. The solar panels will be spread over 164 hectares, an area the size of around 225 soccer pitches.
The park is to be built in Weesow-Willmersdorf, 30 kilometers east of Berlin and will have a capacity of 175 megawatts. It will also save some 125,000 tons of CO2 emissions compared with a conventional power plant. Frankfurt-listed EnBW, controlled by the state of Baden-Württemberg and local network operators, has received planning permission and is working out the technical details.
Consumers footing the bill
If it’s realized, the project will mark a turning point in the financing of solar power in Germany. Up until now, the country’s renewable energy law has subsidized investors in power from renewable sources, such as the sun and wind, by guaranteeing them fixed feed-in tariffs for the electricity produced. These have been well above the wholesale price of power because that was the only way investors could recoup their outlays.
Consumers made up the difference between the feed-in tariff and the market price by paying a surcharge on their electricity bills. Even though tariffs have been lowered and the system has been reformed to take greater account of market forces, the surcharge still makes up more than a fifth of electricity prices.
But EnBW wants to sell its solar power at market prices, not the feed-in tariff. Zimmer said that solar parks with an output of 50 megawatts and above could now operate without subsidies.
That’s due to market developments. Solar module prices have tumbled more than 75 percent in the last 10 years while wholesale power prices have risen.
At present a kilowatt hour of power is trading at just under 5 cents in the wholesale market, and the price is expected to rise. If that trend continues, companies will be able to make money from unsubsidized solar power.
EnBW made headlines two years ago when it won a no-subsidy bid for an offshore wind farm project in the North Sea that will have a capacity of 900 megawatts and go online in 2025.
Other companies may follow
Newly-built solar power plants in favorable locations are already cheaper than fossil-fueled power plants and that trend will increase sharply by 2035, according to a study by the Fraunhofer Institute for Solar Energy Systems (ISE).
A new solar park currently costs between 3.71 and 11.54 cents per kilowatt hour on average. By comparison, power from conventional plants costs up to 21.94 cents per kilowatt hour to produce, the researchers found.
“The cost of solar power from large-scale plants has fallen by half in the last five years and could go down by a further 50 percent,” said Götz Fischbeck, head of Smart Solar Consulting.
Other power companies will likely follow EnBW’s example. With a date now set for the end of coal power by 2038, utilities Vattenfall and BayWa have announced plans to build industrial-scale solar and wind plants in open-cast lignite mining sites in the Lausitz region of eastern Germany. They too want to forego subsidies.