Germany’s Solar Cell Promotion: An Unfolding Disaster

25 Pages Posted: 4 Aug 2012

See all articles by Manuel Frondel

Manuel Frondel

RWI Leibniz Institute for Economic Research ; Ruhr University Bochum (RUB)

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen); Ruhr-Universität Bochum (RUB); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)

Date Written: July 2, 2012

Abstract

This article revisits an analysis by Frondel, Ritter and Schmidt (2008) of Germany’s Renewable Energy Act, which legislates a system of feed-in tariff s to promote the use of renewable energies. As in the original article, we argue that Germany’s support scheme subsidizes renewable energy technologies not based on their long-term market potential, but rather on their relative lack of competitiveness, with the photovoltaics (PV) technology enjoying high feed-in tariffs, currently over double those of onshore wind. The result is explosive costs with little to show for either environmental or employment benefits. Indeed, we document that the immense costs foreseen by Frondel and colleagues have materialized: Our updated estimate of the subsidies for PV, at 100 Bn €, exceeds their expectations by about 60%. Moreover, with installed PV capacities growing at a rapid rate, these costs will continue to accumulate, diverting resources from more cost-effective climate protection instruments.

Keywords: Energy policy, employment effects, climate protection

JEL Classification: Q28, Q42, Q48

Suggested Citation

Frondel, Manuel and Schmidt, Christoph M. and Vance, Colin, Germany’s Solar Cell Promotion: An Unfolding Disaster (July 2, 2012). Ruhr Economic Paper No. 353. Available at SSRN: https://ssrn.com/abstract=2122527 or http://dx.doi.org/10.2139/ssrn.2122527

Manuel Frondel (Contact Author)

RWI Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
45128 Essen
Germany

Ruhr University Bochum (RUB) ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen) ( email )

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Essen, 45128
Germany
++49 201 8149-227 (Phone)
++49 201 8149-236 (Fax)

Ruhr-Universität Bochum (RUB)

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D-44780 Bochum
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
0049-201-8149-237 (Phone)

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