Research shows Germany’s investments in renewables are ‘paying back’

In a recently published quantitative study, researchers at the Brandenburg University of Technology in Germany reported that the “majority of subsidies” required to reach the costs associated with the Renewable Energy Sources Act, the so-called EEG, have already been covered. An estimated 80% to 90% of subsidies for units in operation have already been re-paid. Furthermore, costs of newer installations of wind offshore, wind onshore and ground-mounted PV are often competitive and have “improved considerably.”

The study, “Pay-back time: Increasing electricity prices and decreasing costs make renewable energy competitive,” published in Energy Policy quantifies the aggregated subsidies of all renewable energy units that have been built in Germany up to now. The researchers chose Germany because of its early renewable energy leadership, a track record of investment, and to provide quantitative information amidst discussions in the country about continued investment.

“While extremists in Germany want to tear down all wind turbines, others want 100% renewable energy tomorrow. In reality, we are in a complex system with – at least partly – opposing objectives: security of supply, protection of the environment and energy costs,” Felix Müsgens, corresponding author of the study, told pv magazine. “Our research provides quantitative insights contributing to and objectifying the discussion.”

The subsidies arising from 2000 until 2041 were calculated based on several assumptions and several schemes, such as feed-in tariffs, as well as the number of renewables units, capacity in MW, and average unit size. The formulas are described in detail in the paper. Biases and data quality measures are also documented.

Future market prices were derived from data on German electricity futures obtained from the European Energy Exchange (EEX), and estimates based on recent research by four different academic, commercial, and institutional sources. The researchers noted that future electricity prices are influenced by higher gas price assumptions and higher CO2-emission certificate prices.

The analysis estimates the costs associated with the RES Act under two price scenarios – a Crisis scenario and a Post-Crisis scenario – with the former reflecting a price trajectory that considered limited or costly gas supplies as seen in 2022. The latter supposes a more stable price pathway, where gas supply issues are better managed, preventing extreme price surges.

Among the findings, the team determined the net subsidy in the future is between €26.7 and €71.8 bn, or 7 % and 17 % of the total net subsidies, depending on the scenario.  It noted that the result confirms the “high competitiveness” of the whole renewable energy fleet in today’s energy market.

Stating that the net support costs of renewable energies have been high in the past, the researchers said that “most net subsidies have already been paid,” and the current low cost of newer installations of wind, onshore and offshore, and ground-mounted PV technologies are economically profitable. “Also, how relatively little subsidies are expected for the future,” stated the researchers. 

When newer renewable energy installations are compared, offshore and onshore wind and ground-mounted solar are “economically profitable,” while onshore wind has been the most cost-efficient technology over time. And solar has had the steepest cost reductions.

Pointing to solar PV’s transition from “the most expensive source of electricity generation” to being competitive “even without subsidies” in diverse applications and countries, Müsgens said, “In combination with battery storage, solar power will help the energy transition tremendously.”

The team concluded that the expansion of wind power and ground-mounted PV should be the priority, based on being the most “cost-effective technologies.” Furthermore, a focus on reducing other barriers beyond financial, is called for, such as “streamlining the permitting process for RES projects and increasing community acceptance and deployment of flexibility technologies, according to the authors.

The group is now researching ways to ease the integration of more solar capacity. Research on the degradation of PV modules is also underway.

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