The rising cost of solar power: from market driver to financial burden - updated

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Solar subsidies are now available throughout most of Europe, paying out for every kilowatt-hour of renewable electricity generated. Yet while these payments are praised for driving the increased uptake of photovoltaic power, they are also becoming increasingly in danger of costing European energy suppliers a fair wedge in payouts every year.

Leading solar generators, including Germany, Italy, France, Spain and the Czech Republic are leaning progressively towards becoming burden areas according to Vishal Shah, senior analyst at Barclays Capital.

Shah claims that based on current demand projections, leading EU nations will spend an estimated €8.5 billion on solar PV in 2010 in comparison to the €5.7 billion spent in 2009. They will then pay out €11 billion on solar PV in 2011. This is a hefty payout when you consider that the cost of subsidizing renewable energy is passed down from the energy supplier to the consumer.

The cost burden of new solar PV installations (i.e; NPV over 20 years) will be €34 billion for 2010 installations (up sharply from €22 billion in 2009) and €28 billion for 2011 installations, Shah suggests.

Judging by the damage subsidizing solar energy is causing Europe’s energy suppliers’ bank balance, it is no surprise that feed-in tariff (FiT) cuts are being announced left, right and centre. All of the above markets have announced FiT cuts in the last two years, some more severe than others, but cuts nonetheless. As the uptake in solar power increases throughout Europe, so the incentive must adjust, otherwise the nation will be left with a lot of renewable energy, but no money left to subsidize it.

This blog has been updated to cite energy suppliers as the source of FiT payments, not the aforementioned European governments.

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