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Germany’s Feed-In Tarriff

By Matthew Yglesias  

"Germany’s Feed-In Tarriff"

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SolarWorld

We went on Saturday to see some production facilities from the company SolarWorld which makes photovoltaic cells and panels. Specifically, they specialize in making panels that can be installed on your rooftop on a relatively small scale. The possibility of doing this is one of the big potential advantages of solar power—all kinds of buildings can be small power plants, just as they’re all small consumers of electricity. And since both the amount of electricity you can generate and the amount of electricity you need are somewhat proportional to the size of the structure, it’s a very appealing concept. Rooftop solar also promises a steady supply of local blue collar jobs doing installation and repair work.

But there’s a problem. When you want to use electricity and when the sun happens to be shining aren’t things that line up very well. Indeed, in the home context they line up terribly. Germany has, however, devised a very solid regulatory solution to this in the form of a feed-in tarriff. Basically this is a rule saying that if you install a PV system on your house, the local utility has to agree to buy electricity from you at a fixed price. That means that while the sun is shining and you’re at work, you’re selling electricity to the grid. Then at night when there’s no sign you’re running your house primarily on electricity you’re buying from the grid that comes elsewhere.

This raises the overall price of electricity a little, but it has a dramatic impact in making solar power viable at scale. So dramatic, in fact, that Germany is a world leader in solar power despite not being sunny at all. If you took a similar policy framework and deployed it in places like Nevada, California, Arizona, New Mexico, and Texas where they have tons of sun it would be hugely effective. And much larger portions of the United States manage to be sunnier than Germany.

Visiting the production facility also drives home the ways in which greater scale can bring down costs. The manufacturing involves an incredibly number of very sophisticated industrial robots and other machines to do the work. Working with subcontractors to get that kind of operation up and running, with the machines built and programmed, must be enormously difficult. But once it’s done, doing it again and again is much simpler.

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