Germany's green energy sector: can it grow without subsidies?

“The production of solar panels has become much cheaper in recent years,” says Claudia Kemfert, energy expert with the German Institute for Economic Research in Berlin. “Manufacturers and providers can’t reasonably ask for subsidies much longer. But they are not competitive yet, compared to conventional energies.”

Overwhelmed by the green boom and under pressure from the conventional electricity utilities, the government has slammed the brakes on subsidies. Hardly a day goes by now without Economy Minister Philip Rösler asking the renewable energy sector for restraint in its demand for financial support. The feed-in tariff will now be adjusted every month rather than every six months, and subsidies for solar installations are scheduled to end in 2017 – five years before Germany shuts down its last nuclear reactor.

“The renewables can probably replace nuclear energy in Germany,” says Mrs. Kemfert. “But not coal, which generates most of our electricity. We will need a lot of new coal-powered plants in the next decades. And that means a rise in CO2 (carbon dioxide) emissions.”

High expectations of solar

By 2020, Germany wants 35 percent of its energy needs to be met with renewable sources, with solar energy contributing 10 percent. By 2050, renewables are meant to provide 80 percent of Germany's energy, and some experts believe that solar installations will deliver more than half of that.

Not everyone agrees. "Photovoltaic [energy] in Germany makes as much sense as growing pineapples in Alaska," said Jürgen Grossmann, CEO of Germany’s second-largest utility, RWE, at a conference in Berlin in January.

Clearly he was referring to Germany's limited sunshine. But even critics more sympathetic to renewables say that far too much money has gone into subsidizing wind and solar energy, and not enough into technologies needed to complement these, such as an up-to-date grid and energy storage.

DENA, the German energy agency, estimates that in order to connect all the planned new energy providers, including large offshore wind-farms in the North and Baltic seas, with customers across Germany, about 3,700 kilometers of high voltage network need to be built by 2025. In the past few years, a mere 100 kilometers of power lines were built.

Running Feldheim on renewables is one thing. Powering large urban areas, the whole economy even, is quite another, and many still doubt it can be done in the next few decades without the use of fossil energy sources. 

“We need to put enough resources into research and development of a smart distribution grid and of energy storage facilities,” says Mr. Frohwitter of Energiequelle. “If we do that, we can supply all private German households with renewable energy in 20 or 25 years from now.”

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