Germany, perhaps the greatest success story for solar energy and a leading exponent and pioneer of the now widely employed feed-in tariff is seriously considering re-thinking its backing of renewable energy. Cuts in German feed-in tariffs while not welcomed by solar investors or those simply looking to make a quick Euro in green energy, are of course necessary and an important mechanism in regulating what can be an explosive sector.

Feed-in tariffs work by offering fixed, premium rates for renewable energy generated and used by small scale generation projects. While Germany has been a world leader in solar energy generation on the back of generous tariffs, it now seems that it in the current climate of austerity, the German government is perhaps rethinking its legislative bias towards green energy projects.

In a statement issued by Environment minister Norbert Roettgen, it certainly appears that the current stance is unequivocally pragmatic when it comes to backing solar energy over more traditional fuel sources. Indeed, pragmatism turned Teutonic bluntness when questioned on plans to further reinforce legislation designed at boosting solar investment,

“We’re in talks with the solar power sector to come to a reasonable further development. Those who want renewable energy should keep in mind that there is a need for society’s acceptance of it,”

Of course, while there is a need to regulate the the solar market in order to prevent a situation similar to Spain where the market became saturated, the fact remains that feed-in tariffs do not come out of the public funds. Instead, they come from the big utility companies obliged by legislation to purchase the units of renewable energy at the rate set by the tariff. This goes to add weight to the argument against reducing tariffs too drastically in Germany. Certainly, protectionism of certain industries at the expense of others is questionable but the figures for renewable energy in Germany speak for themselves.

Reports from the German finance ministry have shown that the revenue from renewable manufacturers alone came to over 16 billion Euros in 2009. In the same year around 294,000 Germans were employed in renewable energy with 64,000 of these working in solar energy. With these employment figures in mind and the fact that in Germany there is a real appetite for renewable energy investment, it would be politically naïve for any government to make too dramatic a cutback to tariff rates, even during these times of draconian spending measures.

After a large number of companies developing thin film PV panels got huge amounts of venture capital funding between 2005 and 2008, a handful are now emerging with viable products.

Thin film PV panels are manufactured in a radically different way to traditional crystalline silicon PV panels.  This means they have the potential to be dramatically cheaper than regular panels because the manufacturing process is faster, uses less energy and requires fewer raw materials.  Despite this promise, thin film PV has a number of drawbacks.  The mains ones are efficiency (thin film PV tends to 11% efficient at best compared with 16% for crystalline silicon) and reliability (early thin film panels showed signs of degradation).

Since the thin film companies got their money a few ago, many have fallen by the wayside.  Setting up a thin film solar factory requires huge amounts of capital so a lot of companies just ran out of money and couldn’t convince investors to top them up with cash.  On the other hand, there are a few who managed to actually complete their manufacturing lines and start producing solar panels.  Unfortunately there is still a long way to go before the solar panels can be sold once that stage has been reached however.  In all markets, solar panels are now seen as a long term investment.  This means that investors need to have absolute confidence that the panels will last through their warranty period (usually 20 or 25 years).  Proving reliability is no easy task.  The panels have to go through months of intense testing, and many banks require at least 2 years of real field data before agreeing to lend money to projects involving those panels.  This means there is a long, long wait before these manufacturers can actually sell panels in any large quantities.

Up until recently there were only one, or possibly two, thin film PV companies that had reached that point, the most notable being First Solar who are one of the two largest solar manufacturers of any kind worldwide.  It seems that after all this time there is now a small selection of companies who may be about to join this list.

For me the front runners for this are the Californian company Miasole, the Japanese manufacturer Solar Frontier, and possibly the German company Q Cells with their Q.Smart thin film panels.  Miasole have just announced a large sales contract with the well respected German distributor Phoenix Solar on the back of two years of testing at their Bavarian headquarters.  Solar Frontier have announced a range of lucrative sales contracts around the world which should mean their panels should start to be seen much more widely in the near future.

There is still a long way to go before we know if people will start choosing silicon over thin film panels.  They still have a lower efficiency, which means they have to be sold significantly cheaper than higher efficiency panels, but it could be that the manufacturing costs are so much lower (once they get to large scale production) that the thin film PV companies are still able to make a good profit when selling at much below current prices.  Whether thin film PV enjoys rapid success or not, from now on there will be significantly more thin film PV companies to choose from.

Ofgem’s Sustainable Development Focus has released figures showing that in the first 6 months of feed-in tariffs in the UK, over 11,000 generator have registered for the tariff, marking a considerable surge in solar photovoltaic installations in particular. Indeed, with 11,352 renewable systems installed, it indicates that the scheme has been more successful than predicted, with enough output to power around 35,000 homes.

Feed-in tariffs work by offering fixed, premium rates for both the energy generated from renewable systems (which is then fed-back into the grid), and the energy used. When first introduced by the Department of Energy and Climate Change (DECC), it was with the intention of incentivising investment in green energy by off-setting the costs of installing renewable energy systems by creating long term, guaranteed yields from the projects. Emulating schemes applied successfully abroad, it seems that in the first 6 months of operation, the tariffs have certainly been effective as a means of boosting renewable installations across the UK.

In order to get the UK grid network fully up to speed with the complex requirements of a low-carbon economy, the Sustainable Development Focus Report also published its proposals for updating the country’s network. Working on a framework of Revenue= Incentives+ Innovation+ Outputs (RIIO), Ofgem is planning on generating £32 billion of investment much needed to upgrade a UK national grid not yet ready for green energy and the mechanisms set up around it.

Alistair Buchanan of Ofgem wrote in a foreword to the report,

“This is the biggest change to the regulatory framework for 20 years and sets the network companies on a path to playing their full role in the transition to a low-carbon economy while delivering value for money for all consumers.”

Scottish and Southern Energy (SSE) has joined the growing list of companies offering solar photovoltaic (PV) schemes to its customers. The SSE solar PV scheme will harness the feed-in tariff to enable its customers to benefit from free electricity generated by the solar panels installed on their roofs. The plan which will see SSE install panels for free on roofs found to be suitable for solar energy follows in the footsteps of a number of other businesses currently running free energy schemes.

The feed-in tariff enables small scale solar pv generators to benefit from guaranteed, premium rates set out by the legislation. In the case of the SSE scheme, households will benefit from free electricity by having solar panels installed on their roofs. Speaking as National Development Manager for SSE, Alan Evans said,

“The introduction of feed-in tariffs (FiT) has changed the economics of micro-renewable generation in a very positive way. However, for many customers the initial outlay required to benefit from these tariffs is still too great. SSE has set up this deal to ensure that there is no outlay by the customer and that they will benefit from free electricity as soon as the system is connected.”

Of course, the greater benefit is for SSE micro-renewables who are able to benefit both from the solar panels and feed-in tariff over the project’s 25 year lifespan. Indeed, the 25 year tariff will enable SSE to benefit from 41.3p per kilowatt hour for electricity generated by the panels and 3p per kilowatt for energy fed back into the grid. With this scheme in place it is expected that a typical household adopting the solar scheme could save around £130 a year on their electricity bill.

Emphasising the benefit to his customers, Evans went on to add,

“Customers also have the reassurance that their contract is with one of the UK’s largest energy companies, with a track record of installing solar PV that extends over more than five years and is backed up by an excellent reputation for customer service.”