Tremendous Success for Photovoltaics: 20 Years of the german EEG

Enormous success in photovoltaics through 20 years of EEG

20 years of EEG. For many, this is a reason to celebrate, for opponents, a reason to curse. No matter what the respective assessment of the EEG is: The success of the EEG in photovoltaics is tremendous and will change the world for the better forever: solar power is already the cheapest energy source in the world and is available on a mass scale. Together with Carsten Pfeiffer, who was actively involved in the development of the EEG 20 years ago in the office of Hans-Josef Fell MdB and is now head of Strategy and Policy of ESD

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

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

In 2000, a standard module/ "workhorse" had 130 Wp/sqm (best values), in 2020 we are at 200 Wp/sqm - with the output per module unit increasing from around 80W to 320Wp. There are even already top modules with 500 Wp on the market - slightly larger in area.

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

Due to the further development of the power electronics in the systems, it is now possible to actively plan systems with shading, e.g. in the winter half year. This leads to a two to sometimes three times higher space efficiency for open-air or flat roof systems compared to the situation 20 years ago.

The costs per kWp output of a PV system have fallen from over 12,000 euros at the end of the 1990s to "from 500 euros/kWp in large megawatt systems".

The prices per kWh of solar power have fallen from over 50 cents/kWh for all small plants in 2000 to entry prices in megawatt plants of 1.5 cents/kWh (Dubai) and below 4 cents/kWh in Germany.

The world market has become more attractive due to the German. EEG, the world market has risen from around 500 MW in 2000 to over 123 GW in 2019. Production capacities will continue to be massively expanded, so that by 2021 we will already have over 200 GW of "state of the art" production capacity. We can also expect to add 500 GW per year in this decade, which would be a thousand times the amount added in 2000. Thanks to the photovoltaics bought cheaply by Germany, over 100 million people already have affordable and reliable access to electricity for the first time. The living conditions of these people are improving considerably as a result and the expansion of decentralised solar plants is continuing to accelerate.

From 100 megawatts to 10,000 at the lowest cost The max. 100 MWp, which will fall out of the EEG remuneration on 1.1.2021, will create room for up to 10 GW of new ground-mounted systems (floating market premium) - if this is not a great success of a law. Solar power from ground-mounted photovoltaic systems costs much less than electricity from CHP plants, as recent calculations by the bne have shown. Electricity from new nuclear power plants costs many times as much as electricity from nuclear power plants, as can be seen in the UK or France. Since solar electricity is now much cheaper than coal-fired electricity, in some countries the expansion plans for coal-fired power plants are being reduced, existing coal-fired power plants are running less frequently. In some countries, coal-fired power plants are no longer being built because they are no longer profitable. Solar power is thus developing into the most important climate protection technology of all. The success did not come out of the blue, it was highly 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 decisive foundations for success from which lessons can be learned? The starting position for renewable energies in 1999 was extremely poor. The energy market, which had been newly created under the Kohl government, offered no incentives for renewable energies. There was no internalisation of CO2 costs, not even a weak emissions trading system. The Electricity Feed Act was double capped, and the new Minister of Economics, Werner Mueller, who was responsible for the Electricity Feed Act, like his ministry, did not think much of the energy turnaround and renewable energies. Moreover, the latter were comparatively expensive, which was especially true for photovoltaics, whose costs at the time were over 80 cents. The high costs were also viewed critically by many SPD economic politicians, some of whom were in turn friends of coal. How it was possible to design a functioning EEG and implement it politically despite this difficult starting position is an exciting story in itself. At this point, it should only be pointed out that from the point of view of the friends of renewables in the SPD and Greens, the government factions at the time, it was crucial to create technology-specific markets that would stimulate mass production in order to create a downward cost spiral. The Electricity Feed Act in force until then had already created such a dynamic for wind energy, which should be continued. The strategic consideration was simple. A sufficiently large market was to create greater demand, which in turn was to stimulate investment in new or larger factories where cheaper electricity could be generated. Growing, progressively larger companies should take more money for research and development and, together with research institutions, drive technological development. It was obvious that remuneration had to be technology-specific, otherwise nobody would invest in the most expensive technologies. The term "technology-specific" does not quite accurately reflect the considerations and implementation in the EEG at the time. Rather, the distinction was made along the lines of energy forms. Wind energy, solar energy, hydropower, bioenergy, geothermal energy and, as a concession to the coal friends in the SPD, mine gas. Within these differentiated forms of energy, the remuneration was in any case technology-neutral. In the case of solar energy, this can easily be illustrated. Electricity from solar energy plants was remunerated, regardless of whether photovoltaic plants or plants with solar thermal power generation were used. And the legislator also deliberately refrained from promoting specific technologies. In other words, conventional silicon technology received just as much compensation as the thin-film technology favored by many at the time. In the case of wind energy, too, it made no difference whether vertical or horizontal, whether three blades, two or just one. The best technology should prevail on the market. But in every form of renewable energy there should be its own tough competition. The idea that renewable energies should compete against each other was foreign to the authors at the time. Even more so. They were aware 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 raise the cost-cutting potential. In other words, cost efficiency was not considered statically, as is so often the case, but dynamically. At that time and in the years that followed, this was repeatedly and sharply criticised by apologists of static efficiency. In extreme cases, the entire EEG was rejected as being cost-inefficient and it was pointed out that money should be used to insulate houses better, which in turn is most cost-effective with polystyrene. This extreme static approach to cost efficiency could be polemically described as styroporisation of the strategy or as an anti-innovation strategy. A comparable situation can be seen today when the costs of cars with combustion engines are compared with those of electric cars, although it is actually quite clear that in a few years electric cars will be significantly cheaper than combustion engines. From the point of view of innovation, criticism of the promotion of electric cars also comes back, according to which the more affluent will benefit more than the wealthier. Innovations and economies of scale will stimulate cost reductions here, as in the case of photovoltaics or mobile phones, which will benefit many later. But back to the starting position at that time. Cost reduction and innovation were the central objectives of the legislators of the time. But it was also obvious that the EEG itself had to contain dynamic elements in order to reflect the expected cost reduction. Two correction mechanisms were created for this purpose. On the one hand, the costs of the technologies were to be recorded every few years in the context of an evaluation and the remuneration was to be adjusted. In order to ensure that costs and remuneration do not diverge too widely in the meantime, annual degression rates - i.e. percentages by which the remuneration for individual renewable energies is reduced each year - were introduced at the suggestion of the Greens. This was intended to roughly anticipate the expected learning curve. These annual reductions had an intended positive side effect. Without this degression, buyers would always have had an incentive to wait with their investment until the technology became cheaper. However, especially in the case of photovoltaics with its expected steep cost curve, this would have led to the investment being postponed again and again. With the annual degression of 5%, this wait-and-see attitude was successfully broken through. Investments were made much faster than the authors of the time had thought. The path to mass production was cleared.

Years later, the cost reduction in photovoltaics, coupled with falling interest rates, proceeded so quickly that yields soared. The installation figures went up steeply and with them the costs for the EEG levy, as the costs per KW fell quickly, but were still very high compared to the stock market price. This was offset by a market-oriented flexible degression (so-called "breathing cap"), which had been developed by the Greens in opposition. However, political mistakes in combination with a clumsy lobbying policy meant that the regulatory adjustments were delayed. The resulting costs of the EEG levy were used by the political opponents of the EEG in general and photovoltaics in particular as an opportunity to reduce the remuneration until demand collapsed. However, the cost reduction for photovoltaics continued, as other foreign markets have now taken over the role of the German market. The momentum continues. Costs are falling and falling, new global sales markets are emerging and are heating up demand and production. Photovoltaic systems in the multi-100 MW range are being developed in Germany, whose electricity is sold without EEG payments. The costs are well below those of systems reduced by the state to 10 MW, which are thus kept artificially expensive. Own consumption is playing an increasingly important role in roof systems. The success story continues, in Germany and more and more other countries where photovoltaics is becoming the most cost-effective form of electricity generation. This gives climate protection a chance that it would never have had without the EEG with its induced innovations and cost reductions in the necessary time frame. Other developments are taking place in parallel, including cost reductions for batteries, which in combination with photovoltaics are opening up new sales markets again. The end of the innovation spiral is far from being reached.

Translated with (free version)

Karl-Heinz Remmers
01. Apr 2020