Now German companies lead the world in solar research and technology. The handful of companies that make inverters, the devices that reverse the flow of electricity and feed power from rooftop solar panels back into national grids, are almost all German. On a sunny day last May, Germany produced 22 gigawatts of energy from the sun—half of the world’s total and the equivalent of 20 nuclear power plants.
The “feed-in” laws and subsidies pushed innovation to the point where solar panels are cheap enough to compete on the open market in Germany and elsewhere. The price for solar panels has fallen 66 percent since 2006, and the cost of solar-generated power may be competitive with coal in a few years, according to a study by UBS. Already, solar projects are thriving in places like India and Italy despite a lack of government subsidies or support, and a recent Deutsche Bank report predicted “grid parity” in Bavaria by next year.
You might think Germany would be smug about all its solar success. But, as usual, folks here are full of doubts. Part of the reason solar panels are getting cheaper is competition from China, which is threatening to push more expensive German producers out of business. Last year, German conservatives tried to end solar subsidies entirely, arguing that plummeting prices were encouraging too many people to install solar panels. They said that the subsidies come at the expense of city dwellers without solar-ready roofs, low-income electricity consumers, and investments in other forms of renewable energy. Even environmentalists have begun to grumble about the solar boom, which sucks up half of Germany’s funding for renewables but provides just 20 percent of green power.
The proliferation of privately owned solar has large power companies in Germany worried. For two decades, they’ve been forced to facilitate and finance their competition, helping turn customers into producers. Soon, rooftop solar and other small-scale, locally owned renewables could upset the market for coal and nuclear power.
Here’s why that’s a problem: Renewable energy sources like wind and solar generate power intermittently, dependent on the sun or fickle breezes. Until researchers can find a way to store energy at a large scale, coal and nuclear plants—which can’t simply be switched on and off at will—must be kept running to guarantee a steady stream of electricity when the sun isn’t shining.
That means overproduction of power during daylight hours, as the country’s ample solar energy floods onto the grid along with electricity produced by power plants. Power companies traditionally charge more during the day, when offices are full and manufacturing plants are in full swing, so the glut of daytime solar power reduces their profit. The proliferation of solar panels on homes also takes high-margin residential customers off the grid at peak hours. And the energy surplus has driven prices for traditional coal and nuclear power down, even as renewables are still guaranteed more-than-competitive rates. As power companies try to pass the costs to consumers in the form of higher bills, that just encourages more people to put solar panels on their roofs.
Already, Germany’s power companies are closing power plants and scrapping plans for new ones. Germany had a national freak-out after the Fukushima disaster and decided to abolish nuclear power by 2023. Meanwhile, energy prices continue to sink, and solar installation continues to grow. By decentralizing power generation, the renewables boom could do to the power industry what the Internet did to the media: Put power in the hands of the little guy, and force power companies to rethink how they do business. As soon as the sun comes out, that is.