Germany and the Solar Revolution

During the Cold War, the radical anti-capitalist left (a group quite distinct from mainstream capitalism-taming liberals) was perpetually searching for a country that would prove by example the viability of socialism, defined as government ownership of all industry and major enterprises. The socialists in the West who had not already soured on the Soviet Union mostly turned against it by the mid-1950s, following revelations about Stalin’s atrocities. From that point until the end of the Cold War in the 1980s, the dwindling numbers of true believers claimed to find a successful socialist experiment in one country after another: Mao’s China, Tito’s Yugoslavia, Castro’s Cuba, even, for a time among, some Western militants in the early 1970s, North Korea. They didn’t deny that these countries had certain, ahem, problems—police-state repression and mass exoduses by fleeing citizens, among other minor defects. But they wanted to believe that, whatever its faults, the utopia du jour proved that you could successfully run a modern economy along the lines of Marxist-Leninist theory.

I am not comparing Greens to communists, in any other sense, when I observe that the validation of a certain kind of faith in renewable energy has depended, in some quarters, on a similar belief in the existence of nation-scale demonstration projects of the feasibility of solar power, wind power, biomass or the other preferred alternative to fossil fuels (and also zero-CO2 emission nuclear energy, which, for no very good reasons, is anathema to most environmentalists). In recent years, Germany—which plans to phase out its nuclear plants while subsidizing solar energy—has been to solar energy enthusiasts what Castro’s Cuba was to pilgrimage-making “sandalnistas” on the radical left a generation ago. With Lincoln Steffens, the fellow-travelling American journalist who visited the Soviet Union in the 1920s, they could say: “I have seen the future and it works.”

But the German solar energy future may not be working after all. On January 18, Der Spiegel published an article by Alexander Neubacher entitled “Solar Subsidy Sinkhole: Re-Evaluating Germany’s Blind Faith in the Sun.”

As is so often the case in winter, all solar panels more or less stopped generating electricity at the same time. To avert power shortages, Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic. To offset the temporary loss of solar power, grid operator Tennet resorted to an emergency backup plan, powering up an old oil-fired plant in the Austrian city of Graz.

Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.

So much for the argument in the U.S. that even cloudy Germany will soon derive much if not most of its electricity from solar energy, an argument which might be summarized by a Steven Colbert-esque phrase: “Even Germany—So Can America!”

But it gets worse. The German solar energy industry has been propped up by massive subsidies, including the kind of disguised subsidies known in the U.S. as “renewable energy portfolio standards” which require utilities to purchase relatively expensive renewable energy and pass the costs along to utility rate-payers. You would think that progressive friends of American workers would be outraged at a system that forces the working-class majority, through higher electricity bills, to subsidize the mostly-rich people who invest in solar energy companies selling energy to public utilities that are forced by law to buy their expensive and uncompetitive product. But a widespread backlash against this particular stealth form of green crony capitalism has yet to occur in the U.S.

Not so, however, in Germany. According to Spiegel:

Until now, Merkel had consistently touted the environmental sector's "opportunities for exports, development, technology and jobs." But now even members of her own staff are calling it a massive money pit.

New numbers issued by the pro-industry Rhine-Westphalia Institute for Economic Research (RWI) will only add fuel to the fire. The experts calculated the additional costs to consumers after more solar systems were connected to the grid than in any other previous month in December. Under Germany's Renewable Energy Law, each new system qualifies for 20 years of subsidies. A mountain of future payment obligations is beginning to take shape in front of consumers' eyes….

The RWI also expects the green energy surcharge on electricity bills to go up again soon. It is currently 3.59 cents per kilowatt hour of electricity, a number the German government had actually pledged to cap at 3.5 cents. But because of the most recent developments, RWI expert Frondel predicts that the surcharge will soon increase to 4.7 cents per kilowatt hour. For the average family, this would amount to an additional charge of about €200 a year, in addition to the actual cost of electricity. Solar energy has the potential to become the most expensive mistake in German environmental policy.

As of this writing, the euro:dollar exchange rate is 1:1.30. So if Frondel’s estimates are correct, German households would be paying more than $230 dollars extra a year in electricity bills to subsidize corporate solar power providers, who, like too-big-to-fail banks, would keep the profits while socializing the costs.

Another utopia turns out to have been a mirage. But true believers in a short-term, painless transition to a world run mostly by renewable energy will not be discouraged. No doubt Germany, the supposed center of the world solar power revolution, will soon be replaced by some other supposed national demonstration project for renewable energy—Brazil and biomass, maybe, or Britain and wind?