Germany, once the world's leading market for solar power, is pulling back its subsidies.
Q Cells, once the world's largest solar company, just went bankrupt.
This isn't happy news. If the country that birthed the Green Party cannot sustain its support for solar, what does that tell the rest of us?
It should tell us that it's time (actually way past time) to get serious about energy and climate policy.
This week, as I followed the news from Germany, I talked with a couple of energy-policy experts who I respect–Jesse Jenkins of the Breakthrough Institute and Gernot Wagner of the Environmental Defense Fund. I also watched an interview (below) with Bill Gates from the Wall Street Journal's Eco-nomics conference. They disagree about some specifics, but they all agree that the U.S. needs to get a lot smarter about how to drive a transition to low-carbon energy. So let's try to see what we can learn from Germany, and the rest of Europe.
Perhaps the most obvious takeaway is that we should not place expensive bets on any one solution. That's what the Germans did, with generous subsidies in the form of a feed-in tariff for solar. Even though the costs of solar have dropped dramatically, the subsidies were not sustainable. Remember when people said nuclear was too cheap to meter. Solar PV is too costly to subsidize on a scale that matters.
Here's how The Guardian reported the story last month:
You can have too much of a good thing, it turns out. The German government has said it has been forced to cut subsidies for solar panels, because demand was so high it could no longer afford to support the green technology.
In other words, the Germans are cutting back on solar subsidies not because they didn't work, but because they did. The government wants to drive down solar installations to less than half of the 7.5 gigawatts (27 percent of the world's total) that it installed last year.
It's not just Germany, either. The Spanish market went from being the largest in the world, at 2.7 GW, in 2008 to installing 17 megawatts -- a drop of 99 percent -- after subsidies were slashed and a cap on new installations was imposed, according to ClimateWire [subscription required]. Italy, which was the world's top market in 2011, is also talking about cutting back.
All this, mind you, is happening in Europe, where there is a broad political consensus that climate change is serious business.
Jesse Jenkins and Gernot Wagner agree that this points to the limits of a clean energy policy that relies on subsidies for deployment. That's essentially what we have in the U.S., in the form of tax credits for solar and wind power, and state renewable portfolio standards that require utility companies to generate a percentage of their electricity from renewable sources. Certainly there are benefits to policies that drive deployment–they achieve immediate reductions in CO2 emissions, and they can help get infant industries, like wind and solar, off the ground.