Subsidy Reversals Continue – What’s Next??
When you want more of something (solar in 2000-2005), you subsidize it. When you want less of something (Spain, 2009+, Germany?), you eliminate this incentives and, eventually, the subsidies “go negative.”
After a decade of outsized subsidies (and despite substantial efforts to reduce in line with improved relative economics), German policy makers have “crossed over” from subsidizing to taxing solar power.
This week, the cabinet voted to charge new rooftop installations a per kilowatt hour fee for “consuming their own power.” Essentially, the levy will offset some of the fixed cost of distributing energy to solar users who also rely on the grid for power.
So far, this fee is limited to new, larger (>10 kw) systems, but left open a charge for smaller and existing installations.
This rule follows a controversial implementation of a ‘net metering fee’ on new solar installations in Arizona – again designed to offset the heavy fixed cost (generally half the electric bill) of distributing incremental power to solar users. The Arizona tariff is only around 10% of the average power savings, but essentially wipes out the present value (LCOE) of the benefit, assuming a 6.5% return on capital. “Who pays for the fixed cost of the grid” is an issue that has, until recently, escaped German policymakers, with significant negative implications for most German utilities.
Forty states have net metering programs. When will the risk of similar fees matter to investors in “solar financiers” who will install equipment on your roof and sell solar power to the owner at a modest discount to retail?