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Germany's solar cell promotion: Dark clouds on the horizon

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Listed:
  • Frondel, Manuel
  • Ritter, Nolan
  • Schmidt, Christoph M.

Abstract

This article demonstrates that the large feed-in tariffs currently guaranteed for solar electricity in Germany constitute a subsidization regime that threatens to reach a level comparable to that of German hard coal production, a notoriously outstanding example of misguided political intervention. Yet, as a consequence of the coexistence of the German Renewable Energy Sources Act (EEG) and the EU Emissions Trading Scheme (ETS), the increased use of renewable energy technologies does not imply any additional emission reductions beyond those already achieved by ETS alone. Similarly disappointing is the net employment balance, which is likely to be negative if one takes into account the opportunity cost of this form of solar photovoltaic (PV) support. Along the lines of the international energy agency [IEA, 2007. Energy policies of IEA countries: Germany, 2007 review. International Energy Agency, OECD, Paris, p. 77], we recommend the immediate and drastic reduction of the magnitude of the feed-in tariffs granted for solar-based electricity. Ultimately, producing electricity on this basis is among the most expensive greenhouse gas abatement options.

Suggested Citation

  • Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M., 2008. "Germany's solar cell promotion: Dark clouds on the horizon," Energy Policy, Elsevier, vol. 36(11), pages 4198-4204, November.
  • Handle: RePEc:eee:enepol:v:36:y:2008:i:11:p:4198-4204
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    References listed on IDEAS

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    1. Frondel, Manuel & Peters, Jorg, 2007. "Biodiesel: A new Oildorado?," Energy Policy, Elsevier, vol. 35(3), pages 1675-1684, March.
    2. Papineau, Maya, 2006. "An economic perspective on experience curves and dynamic economies in renewable energy technologies," Energy Policy, Elsevier, vol. 34(4), pages 422-432, March.
    3. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," RWI Discussion Papers 37, RWI - Leibniz-Institut für Wirtschaftsforschung.
    4. Frondel, Manuel & Kambeck, Rainer & Schmidt, Christoph M., 2007. "Hard coal subsidies: A never-ending story?," Energy Policy, Elsevier, vol. 35(7), pages 3807-3814, July.
    5. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," IZA Discussion Papers 2018, Institute for the Study of Labor (IZA).
    6. Lesser, Jonathan A. & Su, Xuejuan, 2008. "Design of an economically efficient feed-in tariff structure for renewable energy development," Energy Policy, Elsevier, vol. 36(3), pages 981-990, March.
    7. Neij, Lena, 1997. "Use of experience curves to analyse the prospects for diffusion and adoption of renewable energy technology," Energy Policy, Elsevier, vol. 25(13), pages 1099-1107, November.
    8. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
    9. repec:zbw:rwidps:0037 is not listed on IDEAS
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    More about this item

    Keywords

    Energy policy Energy security Learning effects;

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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