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This week the economist published an article criticising the German feed-in-tariff. The article wasn’t totally atrocious and it highlighted some of the current issues facing the German solar market. However it did leave out some key points that would have changed the articles’s conclusion. Being a fan of both the Economist and the feed-in-tariff I had to respond.

In addition, although I didn’t mention it in my response as I hate nit-picking, the author made a factual error by implying that the solar panel’s made by First Solar incorporate silicon. Since the key differentiator of the world’s largest solar manufacturer is that they don’t use silicon, this error raises doubts about the author’s level of expertise or research.

You can read the article using this link and my reply is shown below.

http://www.economist.com/businessfinance/displaystory.cfm?story_id=15213817

My response:

Sir,

Whilst your article makes some valid comments, it misses two key points.

Firstly, according to the Bundesnetzagentur (Germany’s grid regulator), large utility-scale photovoltaic installations accounted for fewer than 20% of the solar market in Germany in 2009. The rest of the market is made up from smaller rooftop systems. This is not the case for wind energy (since their performance decreases disproportionately with size). This means photovoltaic installations compete for the retail electricity price rather than the wholesale electricity price. Since retail prices can be four times greater than wholesale ones, solar energy has an easier cost target than wind energy.

The second point is that the cost of energy from photovoltaic systems is predicted to decrease at a faster rate than the energy from wind turbines. The basic components that make up a wind turbine have been costed-out for far longer than those making up a solar installation. According to the European Photovoltaic Industry Association, economies of scale and technological innovation will bring solar energy to cost competitiveness with regular grid prices by the middle of this decade, including in cloudy Germany. This means the end of subsidies is well-within sight.

It is clear that the German solar market became overheated in 2009, and in fact many within the industry have themselves called for the feed-in-tariff to be reduced faster than originally planned. However considering the above factors, alongside the fact that many of the world’s leading solar companies are German as a result of subsidy, Germany’s pioneering feed-in-tariff should be considered a resounding success.

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