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Germany’s Solar Cell Promotion: An Unfolding Disaster

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  • Manuel Frondel

    ()

  • Christoph M. Schmidt
  • Colin Vance

Abstract

This article revisits an analysis by Frondel, Ritter and Schmidt (2008) of Germany’s Renewable Energy Act, which legislates a system of feed-in tariff s to promote the use of renewable energies. As in the original article, we argue that Germany’s support scheme subsidizes renewable energy technologies not based on their long-term market potential, but rather on their relative lack of competitiveness, with the photovoltaics (PV) technology enjoying high feed-in tariffs, currently over double those of onshore wind. The result is explosive costs with little to show for either environmental or employment benefits. Indeed, we document that the immense costs foreseen by Frondel and colleagues have materialized: Our updated estimate of the subsidies for PV, at 100 Bn €, exceeds their expectations by about 60%. Moreover, with installed PV capacities growing at a rapid rate, these costs will continue to accumulate, diverting resources from more cost-effective climate protection instruments.

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File URL: http://repec.rwi-essen.de/files/REP_12_353.pdf
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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0353.

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Length: 23 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:rwi:repape:0353

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Keywords: Energy policy; employment effects; climate protection;

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References

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  1. Lehmann, Paul & Gawel, Erik, 2013. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," Energy Policy, Elsevier, vol. 52(C), pages 597-607.
  2. Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M. & Vance, Colin, 2010. "Economic impacts from the promotion of renewable energy technologies: The German experience," Energy Policy, Elsevier, vol. 38(8), pages 4048-4056, August.
  3. Grösche, Peter & Schröder, Carsten, 2011. "Eliciting public support for greening the electricity mix using random parameter techniques," Energy Economics, Elsevier, vol. 33(2), pages 363-370, March.
  4. Manuel Frondel & Rainer Kambeck & Christoph M. Schmidt, 2006. "Hard Coal Subsidies: A Never-Ending Story?," RWI Discussion Papers 0053, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  5. Johann Wackerbauer & Jana Lippelt, 2012. "Photovoltaics: Boom of the Rising Sun," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(1), pages 70-73, 04.
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Cited by:
  1. Gawel, Erik & Strunz, Sebastian & Lehmann, Paul, 2014. "A public choice view on the climate and energy policy mix in the EU — How do the emissions trading scheme and support for renewable energies interact?," Energy Policy, Elsevier, vol. 64(C), pages 175-182.
  2. Alvaro Calzadilla & Manfred Wiebelt & Julian Blohmke & Gernot Klepper, 2014. "Desert Power 2050: Regional and sectoral impacts of renewable electricity production in Europe, the Middle East and North Africa," Kiel Working Papers 1891, Kiel Institute for the World Economy.

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