Cheap solar takes market away from gas
The fastest-growing renewable energy in Germany has been solar power. Maybe too fast. Even as the government is cutting back on once-generous subsidies for the technology, the country is expected to reach a total solar installed capacity of 52,000 MW by 2017 or 2018, according to Environment Minister Peter Altmaier. That is up from 6,000 MW in 2008, almost a ninefold increase.
"Solar is already having a material impact on energy markets," said Jason Channell, clean technology analyst at Citigroup. "On hot, sunny days and weekends, the peak, which would previously have been supplied by gas, has almost entirely gone over to solar. This is the most valuable part of the curve, as electricity prices are highest at the period of highest demand."
Solar is already competitive with conventional energy in many parts of Germany and will keep getting cheaper, while conventional fossil fuels are more likely to increase in production costs, Channell said.
"This peak effect has resulted in some gas plants in Germany running in 2012 for no more than a handful of days, with resulting profit warnings from associated utilities," he said. "The flexibility of gas lends itself to peak generation, and hence it has been the first to suffer."
If and when wind and solar capacity double their outputs from current levels, base-load plants, which have to run constantly to ensure grid stability, will start to suffer financially as well and risk becoming uneconomical.
"Ultimately, markets such as Germany must move to a capacity payment mechanism, whereby the owners of a base-load plant are compensated via consumer bills to keep it open so it's available when it's needed, for example in the winter," Channell said. "Ironically, this upward impact on bills will only likely to make consumers more likely to put panels on their roofs" and use the power they generate for themselves.
Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500