In Germany, feed-in tariffs for new solar arrays drop each month, but by varying rates dependent upon recent installation volumes. Craig Morris points out that, while German solar proponents mainly complain about the market slowing down, new installations continue to overshoot the government’s target.

(Photo by Bernd Sieker, CC BY-SA 2.0)

In November, feed-in tariffs for a kilowatt-hour of solar power from new arrays in Germany will range from €0.1407 to €0.0974, and the highest rate will drop to €0.1368 on January 1. Germany continues to have some of the cheapest solar power in the world – those rates are equivalent to around 0.18-0.125 USD.

From August to October, feed-in rates for new solar arrays automatically dropped by 1.8 percent each month because the previous rate of installations exceeded the government’s monthly rolling target corridor of 2.5 to 3.5 gigawatts p.a.. Since 2010, Germany has been installing solar at an annual rate closer to 7.5 gigawatts – more than twice the upper target limit – equivalent to more than 600 megawatts per month.

But this year, the market is slowing down considerably. In September, only 291 MW was installed, bringing the total amount installed above 35 gigawatts for the first time. The official figures are available (in German) from the Network Agency’s website.

Within the target corridor, feed-in tariffs would be reduced for new systems by nine percent per year (see chart in German), equivalent to around one percent per month, but for each gigawatt above 3.5, the annual reduction increases by three percent, equivalent to around 0.4 percent per month (it would also be reduced by three percent if the market falls short of the lower target of 2.5).

Germany is expected to have around four gigawatts of new PV installed this year, so the monthly reductions for the quarter from November 2013 to January 2014 will be only 1.4 percent, not 1.8 percent.

Naturally, German proponents of solar are quite upset about the current situation. After all, they had a market of 7.5 gigawatts for three years and now have to make do with just over half of that. But from an international perspective, the German situation remains surprisingly positive. As in other countries, markets are shut down completely when targets are met.

After three years of overshooting the target by nearly 100 percent, German solar continues to roar on ahead of schedule. 35 gigawatts is also equivalent to more than half of power demand during the summer. As a share of peak power demand, no country has more PV installed than Germany, and no other country is installing at this pace at present, with the possible exception of Japan, which may install nine gigawatts this year, compared to peak power demand of around 120 gigawatts.

International readers should understand that these reductions in feed-in tariffs cannot be interpreted as a reduction in support for solar power. Since the first nationwide feed-in tariffs for PV were launched in 2004, automatic annual reductions have been included; indeed, lowering the price of solar was one main goal from the outset. Last year, the country switched to monthly schedule reductions in order to prevent the boom in installations in December, as installers raced to complete projects before new feed-in tariffs took effect on January 1.

Also, keep in mind that these reductions only apply for new systems. The feed-in tariffs for existing arrays continue to apply for 20 years of operation at the levels applicable when the array was connected to the grid.

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.