Around the Globe, Solar Development Are Changing
Feed-in tariffs, tax incentives, rebates, net metering, voluntary goals, portfolio standards and market-based solutions…what works, and what’s next?
In nearly every region of the globe, electricity generation from solar PV (photovoltaic) is experiencing exponential growth. Between 1995 and 2016, global PV generating capacity grew from 600 megawatts (MW) to 256,000 megawatts. This incredible rate of growth did not occur in a vacuum, however. Technological advancements, market forces and government policies combined to stimulate rapid deployment. We can look at current trends, compare the national policies of some of the world’s solar leaders and draw some conclusions about what has worked and what has not.
Germany, Japan, and Italy Lead the Way
The biggest generators of solar are currently China, Japan, Germany, United States and Italy. While we will be looking primarily at the solar incentive policies of these top five nations, we will also look at some smaller countries that are leading in terms of per capita generation of solar. When measuring solar on a per capita basis, the U.S. and China drop out of the top five, with Belgium and Greece making strong top five showings. Germany, Japan and Italy lead in both installed and per capita solar installations.
Germany: A Mature Market Sees Slower Growth
Germany’s commitment to renewable energy development has been nothing short of phenomenal. On April 30th of 2017, Germany hit a one-day record, with 85% of all electricity used in Germany came from renewable sources including solar, wind and hydro. How did Germany manage this impressive feat? The key to the success of solar in Germany has been through the use of a policy mechanism commonly known as a “Feed-In Tariff” or FIT. According to a report on German solar policies by the Solar Energy Industries Association (SEIA):
“FITs guarantee a fixed compensation for electricity produced from solar PV facilities for a period of 20 years. The program requires that transmission system operators (TSOs) purchase all the power produced from these PV systems. TSOs in turn sell the power on wholesale markets and are made whole through a renewables levy (“EEG-Umlage” in German), which is collected from most customers. Heavy electricity users in trade-sensitive areas are (partially) exempt from this renewables levy. Under the program, solar PV installations have increased dramatically, reaching a total installed capacity in excess of 35 GW by year-end 2013.”
Despite the Success of FITs, it appears that they have reached the end of their usefulness for Germany. Because of the amount of renewable capacity available, Germany is producing excess electricity because the older coal and nuclear plants (that provide power in times of lower renewable output) cannot be turned on and off quickly. They can’t sell the excess renewable generation outside of Germany, due to current laws and agreements among European Union partners. The German parliament is looking for solutions to this problem and is moving away from FITs to a new auction system by which developers will bid on renewable projects based on capacity limits set by the government. This more market-based approach may become more common as global markets for solar reach maturity.
China: An Explosion of Solar
It is not unusual to see news stories about the horrible air pollution problems in China. News photos show Beijing residents wearing protective masks as they walk through clouds of smog.
In January 2017, China began canceling orders for new coal plants. Acknowledging the astronomical environmental problems caused by the new plants, China is turning more to installing new renewable generation, although they are still a long way from mitigating the damage done by new, dirty coal plants.
Chinese energy policy is set by its National Energy Agency (NEA). China also uses a form of feed-in tariff to encourage the development of solar energy. The NEA recently announced that in the period from March 2016 to March 2017, solar power generation rose to 21.4 billion kilowatt-hours. China added 7.21 gigawatts of solar power during the period, boosting its total installed capacity to almost 85 gigawatts. This amounts to an 80% increase in renewable generation.
Going Forward: Developing Markets, Developing Policies
Countries in Central America are quietly making serious moves into the solar market. Last year, it was not Germany or China who generated the highest percentage of annual solar energy, but rather Honduras. This poor country gets more than 10% of its electricity from solar each year and is pushing to increase its solar capacity. Nicaragua, El Salvador and Panama are all moving heavily to renewable energy production.
It’s not hard to understand why Central American renewables are taking off so fast. With little or no coal resources, expensive diesel generation or geothermal has been used as baseload generation. The recent drop in PV prices, along with the most consistent solar assets in the world makes PV a no-brainer.
Obviously, it is essential to the health of the planet that new, clean energy technology is deployed as rapidly as possible. A combination of approaches that fine-tune the generation and transmission mix will be needed to create a stable and secure global energy market that can both meet demand and reduce emissions. A global energy grid needs to be established. In the meantime, look to our neighbors to the south for new and imaginative ways to build the clean energy economy. These types of major changes can only happen through well-crafted government policies like FITs. Once solar is allowed to compete, new market mechanisms can take over. In the meantime, we may want to look to our neighbors to the south for new and imaginative ways to build the clean energy economy.