Catching rays + cutting emissions

November 27, 2009

The phrase “catching a few rays” might conjure up images of lying on a sunny beach.

But Germany’s Renewable Energy Act has given that phrase a whole new meaning. I’ve discovered that you can get paid for capturing the sun’s energy on your roof, converting it into CO2-free electricity with the help of special equipment, and feeding it into the grid — and watch the investment yield handsome long-term returns.

The German feed-in tariff system is as simple as it is successful – which is probably why Germany produces as much solar power as the rest of the world combined. German utilities are obliged under the Renewable Energy Act to pay above-market feed-in tariffs to producers of photovoltaic or wind energy for a period of 20 years. Germany will add up to 3 gigawatt of PV electricity this year. 

Here’s how the system works. 

Two years ago, after writing this feature on why Germany leads the world in photovoltaic electricity production despite being covered by clouds half the time, I decided to crack open my piggy bank and borrow some money on top of that to invest in a modest 6.8 kWp solar power system for my roof (below left). I added a carport (above right) so that I could put up more solar panels. 

The system cost a total of 30,000 euros and it produces about 5,000 kilowatt hours of electricity each year. More importantly, that saves about 2,700 kg of CO2 emissions. The 5,000 kWh is about 500 kWh a year more than we use. The local utility is required to buy those 5,000 kWh of CO2-free electricity that spin through a meter and into the grid from me at 49 cents per kilowatt for a fixed 20-year period. I buy about 4,500 kWh back each year at the current market rate of about 18 cents per kWh. That amounts to about 2,400 euros of revenue per year, with monthly payments from the utility peaking at about 500 euros in June. (I pay a separate 70 euros per month to the utility for the electricity we use).

I got such a buzz from watching the meter spin green energy off the roof and into the grid that I asked myself: Why stop there? I started looking for another roof.

The national feed-in tariff the utility pays for each kWh of green electricity I pump into their grid fell from 49 to 46 cents in 2008 but the price of solar panels fell even further.

So I borrowed 40,000 euros from a bank and rented the roof of a local kindergarten (below) in late 2008 to build an even larger PV system – 10 kWp that produces about 9,000 kWh per year (saving nearly 5,000 kg of CO2). That brings in about 3,900 euros per year that will pay off the bank loan over about 12 years. 

After that, I asked myself again: Why stop now? The feed-in tariff fell to 43 cents per kWh in 2009 but the price of solar panels fell even further. So I borrowed an additional 80,000 euros and rented the roof of a local school’s gymnasium (below right) – 20 kWp producing about 19,000 kWh per year (cutting 10,000 kg CO2) and yielding some 8,200 euros. Revenues from the utility also go directly to the bank to repay the loan.

I was hoping to rent another school roof in Berlin this summer but there were all sorts of bureaucratic snags and the project was scrapped. But in 2010 – even though the feed-in tariff will fall to 39 cents for the 20 years to 2030 – I’m hoping to find another roof for an even larger system.

There’s no getting rich quick using this business model, but it is eliminating a few tonnes of CO2 each year and the loans will have been paid off in little more than a decade.

The feed-in tariff for new systems will probably fall by about 10 percent each year and the price of solar panels will probably keep falling at a similar rate. By about 2015, it’s quite possible that the feed-in tariff utilities pay will have fallen to the same level as cost of conventional electricity — the magic “grid parity” point.

15 comments

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Germany’s feed-in tariff is indeed a success story. If you’re looking for rooftops, there exist a few “solar roof exchanges” that organise the market, allowing rooftop owners to offer their roofs to investors. The leading exchange is http://www.dachboerse.net. It is a truly great model both in terms of its economics and in spurring the use of solar energy. You need a strong enough FiT to make it work, but apart from that the only hinderences in some localities are beaurocratic processes and cultural/public acceptance issues, which in most markets are gradually improving.

Posted by Peter N | Report as abusive

Hey!Thanks for the great info. In the link you can find 3 things you can do right now to help preserve the environment.

Germany must have money to burn! PV solar simply is not competitive with Wind-Power. If the same amount of money had been spent on Wind, there would be TWICE as much reduction in CO2

Posted by D Sakarya | Report as abusive

I live in Austin, Texas and I generate about 4.6MW (or 4, 600 kW) with only a 3 kW solar array…. the city paid 2/3 of the cost before I had to pitch in the remaining amount. Total project cost was only $21,000, but I paid $7,000.Austin is the number once city in subsidizing solar panels. Except for the summer time, I’m selling back electricity every month. Man it feels good to reduce my utility bill.I wish everyone would understand the power of solar here int Texas. My AC/DC converter box and solar panels were made in Germany by Solarworld.City of Austin Solar Panel Rebate:http://www.austinenergy.com/Energ y%20Efficiency/Programs/Rebates/Solar%20 Rebates/index.htm(unfortunately the rebate offer was shut-down for about 6 months due to the economy)

Posted by Andrew Davis | Report as abusive

That claim about wind power is simply garbage. It’s not true. When you consider the environmental cost of all the materials needed for the Wind-Power and add to it the never ending maintenance cost to keep it running, you will find that after 20 years it costs twice as much as Solar PV would have. And all the manufacturing process associated with its manufacture would contribute more CO2 to the environment than it would save. Solar PV is the only true environmentally friendly energy technology available at this time.

This is a step forward unlike other countries around the world who are still sitting on the disgusting habit of oil.

Posted by K From Canada | Report as abusive

Your use of the unit of measure kW (kilowatts) is frequently incorrect in your piece. kW is a measure of power. Many of your measurements are measurements of energy and are properly kWh (kilowatthours). (kWh/year is a measure of power.)V. True’s slamming of wind power is interesting. As I recall, my father came to the same conclusion decades ago, but for both wind and photovoltaics. I wonder whether wind is a good source at night, but utilities are starting to use LiIon batteries now, so maybe we’ll soon be able to store solar. (MIT has found that using carbon nanotubes as mechanical springs beats all present-day energy storage, presumably without deterioration, but it’ll take some development.)Another question is whether it makes more sense to use solar panels in cloudy areas, or to use them in sunny areas and build transmission lines. Here in Boston we had many consecutive gray days of rainy weather over the holiday, not unusual, so we would have needed nonsolar capacity if we were normally using local solar, and when the sun was shining we’d be paying interest on the bonds, wages and taxes for that nonsolar capacity and not getting anything.Siting solar in a desert where it’s never cloudy has reliability appeal. I think one transmission line can serve on the order of a million people. That amounts to maybe 5 lines for this state, and 300 lines nationwide (plus subtransmission within an area, which is already there). Significant, but I’m more interested in power reliability than screeching about icky transmission lines.

Posted by Pete Cann | Report as abusive

This program may cost the government a lot of money but it has a significant impact in the way people are thinking about energy. This program would be perfect for states like Maine who need the economic boost and truly want to reduce their carbon footprint. Thanks for an inspiring story.

Posted by Ian | Report as abusive

It doesn’t cost German taxpayers anything. The cost for the still-higher price of solar power is paid for by electricity consumers, not the government. (The prices are falling by 10% each year so in about 5-6 years there won’t be any extra cost). The higher feed-in tariff adds about 3 percent to the electricity bills of Germans each month — which is about 2-3 euros per month. Opinion polls show 2/3rds of population willing to pay a bit more for more green electricity.

Posted by Erik | Report as abusive

re andrew davis “I wish everyone would understand the power of solar here int Texas. “I fully agree with you; however, I think many people in Texas realize how great solar could be, unfortunately most of us (I live in Dallas) get little to no subsidy monies, so 21,000 is way to much to spend.

Posted by Sandy Lawrence | Report as abusive

I’ve always wanted to setup PV system on my roof but I live in Seattle. Does anybody know if there is a min number of sunny days required to break even in 10-12 years?

With energy, it’s use and it’s payback, we are firmly of the opinion that it’s better to make an investment in renewable energy sooner than later and start the pay back period as soon as possible.We’ve done some research on energy prices in the UK and found that there is a distinct upwards trend. http://www.allecoenergy.com/index.php?ma in_page=cat_page&id=9&cat=HomeConsiderin g that renewable technologies have life spans in excess of 25 years, he who invests sooner will save far more in the long run than he who waits 5 or 10 years for energy prices to rise significantly. In 25 or 30 years, if you do need to replace your microgeneration source you’ll be thankful at having saved 25 years worth of energy bills (or at least reduced ones).

Khopdi, about breaking even in Seattle, maybe you should wait a couple of years for demand to drive PV prices down. Something to keep in mind is that PV is just starting to be cost-effective for utilities/merchant generators, even when sited in an ideal location, so if it’s a win, it’s probably not a very big one.A vital question is whether you’re going to be on the grid or using batteries. Batteries suck. God how I hate them, and so did my boss. They go bad, chemically, at ant time. And even with luck, they’re said to be the most expensive part of a system. (Somebody did once mention a brand they were pleased with, I think; I forget.)On the other hand, if you’re going to be feeding the grid with a synchronous inverter, the power company won’t be thrilled that you’re an erratic source of generation, and it matters what pricing they give you. That could change and change again due to government antics.None of which is a good answer, and I apologize, but I don’t know the good answer.

Posted by Pete Cann | Report as abusive

The sun doesn’t shine that much in Germany either and Seattle is a bit further south (47 degrees north latitude) than Berlin (52 degrees north) so I would imagine there is a reasonable break-even point for Seattle. A lot depends on the level of the feed-in tarif. Berlin only has about 1,700 hours of sunshine per year and it looks like Seattle gets more than that.

Posted by Erik | Report as abusive

[...] Catching rays + cutting emissions – “The system cost a total of 30,000 euros and it produces about 5,000 kilowatt hours of electricity each year. More importantly, that saves about 2,700 kg of CO2 emissions. The 5,000 kWh is about 500 kWh a year more than we use. The local utility is required to buy those 5,000 kWh of CO2-free electricity that spin through a meter and into the grid from me at 49 cents per kilowatt for a fixed 20-year period. I buy about 4,500 kWh back each year at the current market rate of about 18 cents per kWh. That amounts to about 2,400 euros of revenue per year, with monthly payments from the utility peaking at about 500 euros in June. (I pay a separate 70 euros per month to the utility for the electricity we use)…” [...]

The UK’s Feed-In Tariff is currently up to 41.3 pence per kWh, so the Solar Photovoltaic market is currently booming!
My system size is 3.96kWh, and should have paid for itself within the next 8 years.

Posted by SEOaaron | Report as abusive

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