Germany shows government role is key to thriving solar industry

It’s another drizzly, dreary day in eastern Germany -- oddly perfect, it turns out, for demonstrating the potential of solar energy.

Despite the rain, hundreds of thousands of photovoltaic panels still gaze skyward here at the country’s biggest solar farm, like a field of huge silvery sunflowers planted in neat rows marching toward the horizon.

Raindrops splotch their faces, and the steely gray clouds curtain the sun. But the panels remain busy absorbing solar radiation to convert into electricity.

“It’s nothing to do with the heat,” Stefanie Hidde, a spokeswoman for the company that built the plant, said while showing a visitor around. “The modules produce energy also when it’s diffused light. . . . It’s not as much, but it’s producing.”

The energy generated by the Lieberose plant, which went fully on line in October, should be enough to supply electricity for 15,000 households a year while reducing the use of pollution-generating fossil fuels. The plant is the latest piece in the ever-expanding jigsaw puzzle of solar power in this often overcast and soggy country, which has emerged, somewhat incongruously, as the global leader in harnessing the sun for clean energy.

Home to some of the world’s largest solar parks and dozens of companies that manufacture, distribute and install photovoltaic panels, Germany proves you don’t have to be blessed with Hawaii’s weather to grow a thriving solar industry.

What you do need, energy experts say, is a national government willing to foster the development of renewable energy. Leaving it purely to market forces -- or piecemeal local incentives, as in the U.S. -- doesn’t work as well.

In Germany’s case, a renewable-energy law passed in 2000 offered solar-power proponents the foothold they were looking for. The law compels utility companies to buy energy from solar plants at higher rates and to feed the energy into their grids, joining the general flow of electricity around the country. The added cost is then passed along to consumers.

The so-called feed-in tariff virtually guarantees solar plants financial returns of as much as 15% per year -- appealing in normal times, eye-popping during a global recession that has hammered German industry. The result has been a rush of start-up companies and the creation of thousands of jobs in a sector that now employs about 50,000 people.

Two years ago, Germany overtook Japan as the world’s biggest producer of photovoltaic, or PV, panels and cells. Nearly 300 solar farms dot the countryside. A belt along Germany’s midsection, which does enjoy sunny weather in the summer, has been dubbed Solar Valley.

Energy harvested from the sun now accounts for 1% of Germany’s power supply. Although that still lags behind wind and hydroelectric projects, optimists say the amount could climb to 7% by the end of the next decade. By contrast, coal- and gas-fired plants currently provide more than half of Germany’s energy and nuclear power stations with more than 20%.

“It took some time. In Germany, we had no history of PV for a long, long time. But now Germany is a more mature market” than the U.S., said Markus A.W. Hoehner of EuPD Research, a consultancy based in Bonn.

“The major difference is that the U.S. market has no feed-in tariff. You have more than 800 combinations of incentives in the U.S. . . . In each region it’s different,” Hoehner said.

In October, California became one of a handful of U.S. states to approve a feed-in tariff for solar-energy producers, but there is no uniform national policy such as Germany has.

Germany also benefits from a political and social consensus on the need to fight global warming by adopting alternatives to fossil fuels. There are none of the heated debates that still roil some circles in the U.S. over whether climate change is happening or whether humans are to blame. Those are pretty much givens in Germany, the world’s sixth-largest carbon emitter.

Even the recent installation of a new ruling coalition more devoted to free-market policies may not mean as much change to the 2000 law as feared.

Some members of the new government have criticized the feed-in tariff and the higher electricity bills forced on consumers as a consequence -- about $5 extra each month per household, on average. Speculation that officials might slash the preferential rates paid to solar-power providers sent share prices of some companies plunging.

But recent news reports suggest that any reduction will probably be a small one. The law already calls for scaling back the tariff gradually so that the industry is eventually weaned from subsidies altogether.

German officials are keen to avoid what happened in Spain last year, where overly generous government subsidies led to a market glut and caused the solar bubble in that country to burst.

Companies scrambled to take advantage of the handouts, throwing up solar parks across southern Spain, adding almost 2 gigawatts of capacity in 12 months, enough electricity for half a million households. Makers of silicon solar panels around the world worked to keep pace with the demand.

“The Spanish market last year was absorbing all those panels like a black hole,” Hoehner said. But the taxpayer-fueled boom was unsustainable. When the Spanish government decided in September 2008 to limit its subsidies, the market went bust. Panel prices plummeted, thousands of jobs vanished and Spain had to start climbing down from its perch as the world’s No. 1 solar market.

That distinction has gone back to Germany, whose typically cautious approach is now being hailed by many as the model.

In addition to a better-structured tariff scheme, the country also boasts a more diversified market. Unlike in Spain, which focused on building big solar parks, more than half of Germany’s solar-energy capacity comes from panels installed on private homes and farms.

The solar park in Lieberose, the world’s second-largest, sits in a clearing about the size of 210 soccer fields in a wooded area of Brandenburg state. The park, with 700,000 solar panels, is expected to feed a nearby power plant and thus help keep thousands of tons of carbon dioxide out of the atmosphere. (North America’s biggest solar farm, in southern Florida, has half the capacity of the Lieberose plant.)

The land was once occupied by a military installation. To build the $238-million park, the Juwi Group, which has a 20-year contract, had to decontaminate the soil and clear it of munitions.

Critics worry about the impact of such a large clearing on wildlife. Independent monitors have been hired to assess the site’s environmental effects on a regular basis.

Hidde, the spokeswoman for the builder, acknowledged that such projects would not be possible without the government’s pricing scheme. “We’re not, at the moment, in a situation where it would work without our renewable-energy law,” she said. “But that’s the goal.”