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Huge success in photovoltaics through 20 years of the EEG

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Courtesy of Solarpraxis AG

20 years EEG. For many this is a reason to celebrate, for opponents it is a reason to swear. No matter what the respective EEG assessment looks like: The success of the EEG in photovoltaics is enormous and will change the world for good: Solar power is already the cheapest energy source in the world and is readily available.

Blog together with Carsten Pfeiffer, who was actively involved in the creation of the EEG 20 years ago in the MP's office, Hans-Josef Fell MdB, and is now Head of Strategy and Policy at GNI.

Fireworks of EEG success: Germany has brought photovoltaics to the world

ONE A 'waste recipient' of the global chip industry has become its own strong solar silicon production, in which the German company Wacker is still number two in the world.

TWO A standard module / 'workhorse' had 130 Wp / sqm (best values) in 2000, in 2020 we are at 200 Wp / sqm - the output per module unit rose from around 80W to 320Wp. There is even - from Area of somewhat larger - top modules with 500 Wp on the market.

THREE Inverter efficiency has increased from 80% to 99%, so the yield per kWp has increased by more than 20%.

FOUR Thanks to the further development of power electronics in the systems, it is now possible to actively plan systems with shading, for example in the winter half-year. This leads to a two to three times as much space efficiency in open-air or flat roof systems compared to the status of 20 years ago.

FIVE The cost per kWp output of a PV system fell from over 12,000 euros in the late 1990s to 'from 500 euros / kWp in large megawatt systems'.

SIX The prices per kWh of solar electricity fell from over 50 cents / kWh for which in 2000 all small systems fell to entry prices in megawatt systems from 1.5 cents / kWh (Dubai) and below 4 cents / kWh in Germany.

SEVEN The world market is due to the German. EEGs increased from approx. 500 MW in 2000 to over 123 GW in 2019. The production capacities will continue to be massively expanded, so that in 2021 we will already have more than 200 GW 'state of the art' production capacities. 500 GW of new builds per year can also be expected in this decade, which would be a thousand times more than in 2000.

EIGHT Thanks to the cheap photovoltaics bought by Germany, over 100 million people now have affordable and reliable access to electricity for the first time. The living conditions of these people improve considerably and the expansion of decentralized solar systems continues to accelerate.

100 megawatts become 10,000 at the lowest cost

The max. 100 MWp, which falls from the EEG remuneration on January 1, 2021, create space in the apportionment for up to 10 GW of new outdoor systems (floating market premium) - if that is not a great success of a law. Solar electricity from free-standing photovoltaic systems costs significantly less than electricity from cogeneration systems, as calculations by the bne have recently shown. Electricity from new nuclear power plants costs many times as you can see in the UK or France.

Since solar power is now significantly cheaper than coal power, coal power plant expansion plans are reduced in some countries, and existing coal power plants run less frequently. In some countries, coal-fired power plants are no longer being built at all because they no longer pay off. This makes solar power the most important climate protection technology ever.

Success was by no means a matter of heaven, it was fiercely competitive, but above all it was based on important strategic assumptions from which a lot can be learned.

Lessons learned instead of EEG nostalgia - what were the crucial bases for success that can be learned from?

The starting point for renewable energies was extremely bad in 1999. The freshly created energy market under the Kohl government offered no incentives for renewable energies. There was no internalization of CO2 costs, not even weak emissions trading. The electricity feed-in law was double-capped and the new economics minister responsible for the electricity feed-in law Werner Müller, like his ministry, did not believe in the energy transition and renewable energies. The latter were also comparatively expensive, which was particularly true for photovoltaics, the cost of which at the time was over 80 cents. The high costs were also viewed critically by many SPD economic politicians, some of whom were friends of coal.

How it was possible to design and implement a functioning EEG despite this difficult starting point is an exciting story in itself.

At this point it should only be emphasized that from the point of view of the renewables friends in the then government factions SPD and Greens, it was crucial to create technology-specific markets that should stimulate mass production in order to cause a cost spiral. The previously applicable electricity feed-in law had previously developed such a dynamic in wind energy that should be continued.

The strategic consideration was simple:Greater demand should be created through a sufficiently large market; this, in turn, should incentivize investments in new or larger factories that can produce electricity at low cost. Growing, progressively larger companies should take more money for research and development and work together with research institutions to advance technological development. It was clear that the remuneration should be technology-specific, otherwise nobody would invest in the most expensive technologies. The term “technology-specific” does not quite correctly reflect the considerations and implementation at that time in the EEG. The demarcation ran rather along the forms of energy. Wind energy, solar energy, hydropower, bioenergy, geothermal energy and as a concession to coal friends in the SPD, the mine gas. Within these defined forms of energy, the remuneration was always technology-neutral. In the case of solar energy, this is easy to illustrate. Electricity from solar energy systems was paid for, regardless of whether photovoltaic systems or systems with solar thermal power generation. And the legislature also deliberately refrained from which specific technologies to promote. This means that conventional silicon technology received just as much remuneration as thin film technology, which was favored by many at the time. Nor did it matter with wind energy, whether vertically or horizontally, whether three blades, two or just one. The best technology should prevail on the market. But there should be tough competition in every form of energy from renewable energies. The thought, At that time the authors were alien to the fact that renewable energies should compete against each other. Even more. It was clear to them that it would be fundamentally wrong to take the current costs of the respective renewable energies as a starting point. It was much more important to leverage the cost-cutting potential.

In other words:Cost efficiency was not viewed statically, as is so often the case, but dynamically. Back then and in the years that followed, apologists repeatedly criticized static efficiency. In an extreme case, the entire EEG was rejected as cost-inefficient and reference was made to the fact that the money should be used to insulate houses, which in turn is the most cost-effective with polystyrene. This extreme static approach to cost efficiency could be described polemically as the styrofoamization of the strategy or as an anti-innovation strategy. Similar things can be seen today when the costs of cars with internal combustion engines are compared with electric cars, although it is actually quite clear that in a few years' time electric cars will be significantly cheaper than combustion engines. From the point of view of innovation, criticism of the promotion of electric cars is also used, according to which above all the wealthier benefit. Through innovations and economies of scale, here too, as with photovoltaics or mobile phones, cost reductions are stimulated, which will later benefit many.

But back to the initial situation:Cost reduction and innovation were the central goals of the legislators at that time. However, it was also clear that the EEG itself must contain dynamic elements so that the expected cost reduction can be represented. Two correction mechanisms were created for this. On the one hand, the costs of the technologies should be recorded and the remuneration adjusted every few years as part of an evaluation. So that costs and remuneration do not diverge too far in the meantime, annual degression rates were introduced on the proposal of the Greens; ie percentages by which the remuneration for the individual renewable energies is reduced annually. This should roughly anticipate the expected learning curve. These annual reductions had an intended positive side effect. Without this degression, buyers would have always had an incentive to wait until the technology became cheaper with their investment. Especially in the case of photovoltaics with its expected steep cost curve, this would have meant that the investment would always be put off. With the annual degression of 5%, this attentism was successfully broken. Investments were made much faster than the authors at the time thought. The way to mass production was cleared. With the annual degression of 5%, this attentism was successfully broken. Investments were made much faster than the authors at the time thought. The way to mass production was cleared. With the annual degression of 5%, this attentism was successfully broken. Investments were made much faster than the authors at the time thought. The way to mass production was cleared.

Endless cost reductions: Years later, the cost reduction in photovoltaics, with falling interest rates, was so rapid that yields soared. The number of installations rose steeply, and with it the costs for the EEG surcharge, since the costs per KW fell quickly, but were still very high compared to the market price. This could be compensated for by a market-oriented flexible degression (so-called 'breathing lid'), which had been developed by the Greens in the opposition. Political errors in combination with an unskilful lobby policy meant that the regulatory adjustments were delayed. The resulting costs for the EEG surcharge were taken as an opportunity by the political opponents of the EEG in general and photovoltaics in particular,

However, the cost reduction in photovoltaics continued because other foreign markets have now taken on the role of the German market. The dynamic continues. Costs are falling and falling, new global sales markets are emerging and fueling demand and production. In Germany, photovoltaic systems in the multi-100 MW range are under development, whose electricity is sold without EEG payments. The costs are significantly below the state-reduced plants to 10 MW, which are kept artificially expensive. Self-consumption is playing an increasingly important role in roof systems. The success story continues, in Germany and more and more countries where photovoltaics is becoming the cheapest form of electricity generation. This gives climate protection a chance which he would never have had in the required period without the EEG with its induced innovations and cost reductions. Other developments are taking place in parallel, including battery cost reductions, which in combination with photovoltaics are opening up new sales markets. The end of the innovation spiral is far from over.

Huge success in photovoltaics through 20 years of the EEG

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