August 31, 2014
Renewable Power Makes Electricity Expensive In Germany
Residential customers in Germany pay dearly for electric power.
In 2010, Germany introduced Energiewende, or ?energy transformation,? which is its plan to increase electricity production from renewable sources to 80 percent by 2050 and to reduce its greenhouse gas emissions by 90 percent from 1990 levels. In addition, Germany wants to phase out nuclear power by 2022. Prior to Energiewende, the country had introduced other policies related to increasing renewable energy production, such as the feed-in-tariff, that provided lucrative subsidies to renewable technologies paid mostly by residential customers. Due the feed-in tariff program supporting renewable energy, residential electricity prices have more than doubled, from 18 cents per kilowatt-hour in 2000 to more than 37 cents in 2013. The feed-in-tariff subsidy program has cost more than $468 billion, and it is estimated that program costs could exceed $1.3 trillion by the time it expires in 2015. German consumers pay a surcharge on their monthly power bills that increased 18 percent on January 1, 2014, (more than a fivefold increase since 2009) to finance renewable subsidies.[i]
The 37 cents per kwh is amazing. Heavily nuclear powered France is only at 19 cents per kwh and you can see the costs for other countries at that page. The US is around 12 cents and Canada (with lots of hydro and also some nukes) is lower. Denmark is at 40 cents. Note the islands are all very expensive. They can't get natural gas piped in directly from natural gas fields and their grids are small. So many of them have 40-50 cents per kwh electric prices.
Another page with 2011 electric prices shows similar but slightly lower numbers. Germany is again almost 3 times as expensive as the US. Denmark (with lots of expensive offshore wind) is highest among those countries listed at 41 cents per kwh.
Industry in Germany does not pay anywhere near as much for electric power as residences do. Industry basically told the government they'd move their factories abroad unless the renewable costs were shifted mainly to residential customers. For industries where electric power is a substantial portion of total it does make sense to move if electric power prices get too high. Cheap hydro and geothermal electric power have induced aluminum companies to move smelters to Iceland so that Iceland does 2% of world aluminum smelting. Similarly, all else equal if photovoltaics are going to be used to power an industry it makes sense to install the PV panels where the sun shines a lot more than it does in Germany. Why not get twice as much or more electric power per year by installing the panels in Australia, Arizona, the brighest parts of Mexico, or perhaps a very sunny area on the Argentina-Peru border (scroll down to find it).
If you click thru on the first link about Germany you will see that wind, solar and coal use for generating electricity in Germany are all rising. They'll rise further when Germany phases out nuclear power, as will the price of electricity. The electric power prices in Germany are cheapest on a May afternoon with less clouds and long days for lots of solar power. But the grid power from wind and solar is highly unstable Backup coal power plants sell much higher priced electricity at nights, when clouds pass over, and in winters. The coal plants have to sell for much more per kwh because they no longer can run constantly and sell constantly. Wind and solar have subsidies that get passed on to consumers too.
Randall Parker, 2014 August 31 11:39 AM
Easily predictable result, based upon readily available information. This is a conclusion several years old, well supported by the experience.
We all want wind and solar to work out. But these are old technologies that require breakthroughs that may be decades away, for them to be used economically on large scale power grids at high per cent penetrations.
The rationale for diving head first into this empty swimming pool revolves about the carbon question, which is far from settled on the scientific level. Politics is another story, but only a moron would choose a political conclusion when the science is still in a chaotic flux.
If government doubled the residential rates here in Arizona, you'd have a revolution. Germany is a cold country and doesn't need much air conditioning. In the Arizona desert, people will die in large numbers without affordable A/C. So, I'm glad we have the Germans to demonstrate the folly of this sort of nonsense.
John, I recently put solar on my parent's roof. It cost just a bit under $2US a watt before our Renewable Energy Target subsidy was applied. At that price with a 5% discount rate for the cost of money it produces electricity for under 10 cents a kilowatt-hour. Apparently retail electricity prices are now around 12.43 US cents a kilowatt-hour in Arizona. It seems that solar could save people in Arizona at Australian or German installation prices and its cost is continuing to decline. Point of use solar is the cheapest source of electricity available to Australian households and as a result we're building a lot of it. At around solar noon in the state of South Australia today rooftop solar provided about 37% to total electricity use. And looking it up I see see that our wholesale electricity price is about to drop to zero in the wee hours of the morning today thanks to the wind that's blowing outside. The state generates electricity from wind and solar equal to about 40% of total electricity consumption.
PV is only "competitive" because residential per-kWh rates roll the costs of availability and O&M into the per-kWh fee. If you have grid-tied PV you are offsetting energy, but generally not decreasing peak demand at all; this shifts the cost of availability to other consumers.
A fair comparison is with industrial rates. A utility near to me bills 4.3¢/kWh, plus $12.55/kW peak demand each month. It costs over $150/year just to be ready to supply 1 kW on demand; actually supplying it 8 hours a day costs about $125. Residential rates are around 13¢/kWh, which embodies a rather high peak/average ratio (about 3:1?). PV users would have a much higher peak/average ratio, so they should certainly NOT be compensated for back-fed power at the residential rate.
The exclusion of critical facts makes for faulty conclusions.
"German wholesale power prices have fallen about 30% just in the past two years to near eight-year lows, putting big utilities that underinvested in renewables under severe profit pressure. Even so, Germans pay a lot for their household electricity, about $0.34/kWh in 2012. The household tariff includes a "renewables surcharge," expected to amount to roughly $249 per three-person household this year. That'd be three-fifths smaller if households weren't subsidizing many businesses, mainly large ones - exempted from nearly the whole renewables charge, allegedly to boost German competitiveness - by 3-4 billion Euros a year. Yet German industry enjoys the lower spot prices that renewables create, so it pays about the same for electricity as it did in 1978, and less than French industry pays today. This cross-subsidy from households to industry, and the size of the resulting household surcharge, have generated lively debate about how much Germans pay for their electricity and why."
"The fact is that none of what is happening in Germany fits what Americans think .... Germany is switching to renewables quickly, without raising its carbon emissions, with probably the most reliable grid in the world, on a market with freedoms Americans don't even know they lack, with a job market that continues to strengthen (even during the ongoing economic crisis), and in combination with a nuclear phaseout. None of this makes sense to Americans, who respond not by accepting the facts and changing their minds but by getting the picture wrong."
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