Friday, June 11, 2010

FIT ≠ solar

A highly misleading article entitled "Calm the Feed-in Frenzy" has been published over at Renewable Energy World. The article is so bad it is not really worth commenting on except in one respect: it conflates feed-in tariffs with feed-in tariffs for solar power, which a lot of people do.

You can see it coming near the beginning, when FITs are described as providing "returns from generating renewable energy from buildings." Nothing of the sort is true, not even for solar; rates are paid regardless of whether buildings are involved or not. If you put up a wind turbine on a hill, a biomass unit inside or outside of a factory building, or solar power on a roof or in a field, you get paid for the electricity you generate.

Things get even sloppier later:

Feed-in tariffs were introduced in Germany in 1999, offering index-linked payments of 51 euro cents for every KWh of electricity produced. The popular programme was met with a whirlwind uptake. By 2005, renewables already accounted for 10% of electricity in Germany, 70% of which was supported by feed-in tafiffs (sic).

Actually, no -- Germany has never had index-linked feed-in tariffs (meaning that they are not adjusted for inflation). And the feed-in tariffs that went into effect in 2000 (and were voted on in 1999) were only 51 euro cents for the most expensive type of solar power. Less was paid for large solar arrays in the field, and the solar rates for just about everything else were around 10 cents, which was significantly below the retail rate at the time (meaning that all types of renewable energy aside from photovoltaics had already reached "grid parity").

Then comes this really mind-bending analysis:

The bubble in Germany stemmed from the government doubling the rate at which the feed-in tariff decreases year-on-year (by between 5% to 10% depending on the size of the installation) just over a year ago. Reductions in the cost of raw materials and the ensuing over-supply of solar panels contributed to a 25%–30% reduction in the price of building a solar farm, but with no equivalent reduction in the feed-in tariff, the market suddenly promised huge returns for anyone opening a solar farm before the end of last year.
It seems that, for the first time in history, a bubble was created when a government doubled rate reductions. The author makes no mention of the largest economic crisis since 1929, which drastically affected all markets everywhere. Indeed, other policies to promote renewables were also affected; in the US, tax incentives are a common mechanism, and they suddenly proved completely ineffective because companies had insufficient profits to reinvest and write off. And in fact, Germany has responded by adopting lower rates, which go into effect on July 1 (see my previous post).

And then this self-proclaimed "solar energy analyst" provides this insight:

However, too many countries have implemented feed-in tariffs in a piecemeal way and have adopted levels of subsidy that have been unrealistically high, resulting in huge profits for investors and the creation of conditions in which speculators have rushed to build renewables infrastructure purely for the short-term returns.

Which countries?

The article is terrible in so many ways that I do not have time to go into everything, so let's just focus on the author's final conceit:

But how many markets must collapse before more purposeful regulations are introduced to prevent this?
I don't know, maybe you can tell us first how many markets have collapsed? To my knowledge, only the Spanish solar market collapsed, and the question is whether that is a FIT problem or a Spanish problem or a photovoltaics problem (or some combination).

According to Miguel Mendonca, the great collector of global FIT statistics, some 50 countries have FITs, and I don't hear many reports about problems anywhere. The Spanish wind market did not collapse while its PV market was collapsing, and contrary to some reports the German PV market - far from collapsing - is certain to set a new record this year.

So let's make a crucial distinction from now on: feed-in tariffs are not just for solar power.

No comments:

Post a Comment

Post a Comment