Categories: General
Date: Mar 23, 2012
Title: Subsidy floundering in Germany
Excerpt only from The New American -- full story here
Germany - once a global leader in the race for reliance on "alternative" forms of energy - has discovered that no amount of environmentalist ideology can alter the fundamental laws of economics. Although wind and solar "farms" have been the recipients of lavish government subsidies throughout the European Union, the German government is now being forced to concede it cannot continue supporting solar power at the levels that had quickly become customary, and is dramatically reducing its solar energy subsidy.
A Washington Post story by Michael Birnbaum and Anthony Faiola ("Solar industry faces subsidy cuts in Europe") evaluates the decision made by the German government that will drastically reduce the subsidies that have given solar power the appearance of profitability in that nation:
German policymakers indicated last week that they planned to cut once-generous subsidies as much as 29 percent by the end of the month, on top of a 15 percent cut in January, although some details were still being negotiated after protests from the solar industry. Britain and Italy have made similar moves, and in January, Spain abandoned its subsidies altogether, prompting outrage from the solar industry.
It is hardly surprising that such reductions in subsidies would lead to "protests" and "outrage" from the solar industry; an earlier Washington Post article by Faiola in November 2009 took note of the fact that even with subsidies in place, average German families had a hard time adopting solar on a household level since they "can't afford the initial cost, which runs between $8,000 to $20,000 even after generous government rebates. Instead, they must depend on Germany's general grid, which now serves up some of the most expensive electricity in the world."
While many households found themselves priced out of the solar market, small power companies have found that the government subsidies made the difference in profitability because they create an artificial "demand" for solar panels and the power they produce:
Just months ago, a solar firm planting a field of solar panels atop one of Hanover's many sprawling warehouses would have been sure to turn a profit. Now, one solar developer who plans to do that says he'll be lucky to break even now that the subsidies are drying up....
"This whole development has been made possible by Germany and a few other European countries," said Richard Schlicht, the head of Geosol Germany, the company that is building the project on top of the warehouse in Hanover. Solar power "is becoming cheap only through mass production. And this has happened only through creating the demand. To stop it now makes no sense."
In fact, in the assessment of critics of solar subsidies, what makes no sense is that governments have spent billions of dollars creating "demand" for a product that has thus far not proven to be profitable. In an article for Slate.com ("Goodnight Sunshine"), Bjørn Lomborg offered a more direct assessment of the flaws in government subsidies for solar power: