Will Solar Power Survive in the Free Market? We'll See As Germany Cuts Its Solar Subsidies

Berlin’s subsidization of photovoltaic solar panels is about to take a 15% hit this year. Government support of this industry has made Germany the world’s largest solar market. Now the Merkel administration wants the industry to spread its wings, cutting subsidization in order to force the industry to no longer rely on government as a crutch. Depending on how the German solar industry fares in the free market will provide insight in how to use subsidization of alternative energy in the U.S.

A strong finish of solar panel installations in December gave Germany the capacity to produce about seven gigawatts (GW) of solar power in 2011, nearly half of the global total. A rush on panel installations last month pushed the 2011solar energy output up two or three gigawatts to nearly match the 2010 record level of 7.4 GW.

Falling panel prices and warm weather contributed to the spike. Chinese panels have flooded the market recently, leading to the drop in price.

Spain, Japan, Italy, and the Czech Republic are the only other countries to exceed one gigawatt of installed solar capacity in their entire history. California alone topped that mark this year, and China will soon follow. 

This is great, but it falls short of what is needed to achieve momentum in America’s weaning off of fossil fuels. One gigawatt is only enough to replace two coal-fired power plants, or enough energy to power 750,000 homes.

While pressure is being put on German Chancellor Angela Merkel to cut the subsidy, the Germans have made a model for creating a solar infrastructure that has proven successful. This is quite an achievement for a country that receives a relatively low amount of sunlight, notching only half as many sunny days as Portugal.

However, a similar de-subsidization move by Spain virtually gutted the solar industry there, which was once the world leader in solar power.

Is there a middle ground here? How will the burgeoning industry fare on its own? The world is watching, and the fate of the German solar industry may be the canary in the coal mine for alternative energy subsidization in the U.S.

Photo Credit: russf