Not long ago, I wrote about the German drive to replace nuclear energy with solar and wind power.
At the time, Berlin was touting this overture as the "next great push" into a new energy age.
Turns out, plans haven't gone as expected.
This winter has provided a good example of how things can go wrong. Solar has a major drawback in that all panels shut off at the same time. That requires massive reliance on other sources of energy.
Despite its avowed decision to relinquish nuclear power, Germany must now import nuclear-generated power from neighboring countries and resort to coal, despite an earlier move to the contrary, in the face of the highest energy costs in Europe. The government is even opening taboo fuel oil generators to make up the power slack.
A move against fracking has prevented the development of domestic unconventional gas, leaving the country dependent once again on importing volume, primarily from Russia. What had begun as a bold experiment in rebalancing energy sources has resulted in a developing pricing crisis.
The cost of German energy needs has begun stifling economic development. That is likely to become a more pressing issue moving forward. The solar energy industry in the country has been the recipient of massive subsidies, including what is known in the American market as "renewable energy portfolio standards."
These "standards" require utilities and distributors to purchase a certain percentage of their power from more expensive renewable energy sources, passing those added costs on to already besieged consumers.
Rates are now projected to go up as much as 60% in the wake of the nuclear shutdown.
And the problems for end users and renewable energy sources are going to get worse.
At the time, Berlin was touting this overture as the "next great push" into a new energy age.
Turns out, plans haven't gone as expected.
This winter has provided a good example of how things can go wrong. Solar has a major drawback in that all panels shut off at the same time. That requires massive reliance on other sources of energy.
Despite its avowed decision to relinquish nuclear power, Germany must now import nuclear-generated power from neighboring countries and resort to coal, despite an earlier move to the contrary, in the face of the highest energy costs in Europe. The government is even opening taboo fuel oil generators to make up the power slack.
A move against fracking has prevented the development of domestic unconventional gas, leaving the country dependent once again on importing volume, primarily from Russia. What had begun as a bold experiment in rebalancing energy sources has resulted in a developing pricing crisis.
The cost of German energy needs has begun stifling economic development. That is likely to become a more pressing issue moving forward. The solar energy industry in the country has been the recipient of massive subsidies, including what is known in the American market as "renewable energy portfolio standards."
These "standards" require utilities and distributors to purchase a certain percentage of their power from more expensive renewable energy sources, passing those added costs on to already besieged consumers.
Rates are now projected to go up as much as 60% in the wake of the nuclear shutdown.
And the problems for end users and renewable energy sources are going to get worse.
A Record Setting Month
December marked the highest month in history for new solar systems connecting to the grid. The subsidies for adopting renewables expired at the end of the year and additional units are now expected to await a new round of government assistance.But those making it by the deadline are eligible for subsidies over the next 20 years.
That ensures a continued bite out of taxpayer revenues for what will remain a more expensive method to generate electricity.
Unfortunately, cost increases hardly end there.
The so-called "green energy surcharge" applied to electricity bills across the nation will be moving up...again.
This will translate into on average a 200 euro ($260) per year additional expense for each household, after calculating an increasingly expensive energy bill.
This has led one of the leading German national think tanks to label the solar energy push "the most expensive mistake in German environmental policy."
Expectations are that there will be a new emphasis placed on other renewable sources, such as wind power or biomass. Yet there is no possibility that a renewable remedy of any sort is in the cards without significant subsidies and rising costs to consumers.
Ultimately, there will be an ongoing permanent place for solar, wind, and other renewables in the developing energy balance. Despite the prospects emerging in unconventional oil to complement the same in gas, the position of sustainable non-fossil fuel alternatives will improve over time.
Unfortunately, time is also the problem.
Attempts for massive transitions in the near term are hampered by technical limitations and high prices. Unless there develops a genuine market burst point in both usage and generation, this is likely to remain an energy segment dependent on public sector assistance programs. Pure market drivers discourage the use of solar due to both reliability and cost factors.
An investor should keep this in mind when reviewing the recent moves in solar and wind stocks.
Solar Stocks Remain Down Significantly
While primary exchange traded funds (ETFs) in both solar and wind power have been moving up, you should be particularly careful about how sustainable that movement is.First Trust Global Wind Energy (NYSEArca: FAN), is up 2% for the month, but down 6.6% over the past 13 months. Meanwhile, the two most liquid solar ETFs - American Vector Solar Energy (NYSEArca: KWT) and Guggenheim Solar (NYSEArca: TAN) - are both up for the month (4.6% and 3.2%, respectively).
But after reviewing their performance since December 2011, they are significantly down by 33.1% (KWT) and 40% (TAN).
The same shortcomings are apparent when reviewing leading individual companies. The solar sector is becoming controlled by the Chinese, where both the development of new approaches and the building of new usage networks have concentrated in a new center of the solar industry. Even still, Chinese LDK Solar (NYSE: LDK), while up 1.9% for the most recent month, is down a whopping 77.6% since December 1, 2011.
The most visible American company, First Solar (NasdaqGS: FSLR), has lost 13.5% for the month and 55% in the last thirteen months. And the American Depository Receipts (ADRs) of dominant wind power leader - Danish Vestas Wind Systems (OTC: VWDRY) - may be up 7.3% for the month, but still down 63.6% over the same thirteen-month period.
None of this should prompt us to conclude that renewables are on their way out.
Far from it.
But it does indicate that the prospects of these alternatives remain dictated by cycles of government support either in the form of direct subsidies or indirect incentives (such as portfolio standards).
And that does not provide for an adequate investment base.
For now, understand this reality for the solar and renewable investment environment.
[Editor's Note: Dr. Kent Moors is one of the most renowned and most connected oil and energy experts in the world. His Energy Inner Circle is an invitation into his private world of high-level energy contacts, where he recommends companies most likely to be impacted ahead of the seismic changes within the energy sector.
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Well written and researched. It is blatantly obvious that when oil prices go above the $105 per barrel mark, alternative energy sources get a big boost in both government subsidies and consumer and industry attention. Some of the advances that are happening right now in various technologies, will see viable alternatives to the oil and gas dependency. Three of those advances are the development of commercially viable graphene based solar cells, the improvement in battery rechargeability because of the introduction of manganese into batteries, and the yet to be broadly acknowledged, formulas E=MC^2(AeR) and E\=MC^2(AeV). These formulas, especially the latter, explain how it is possible to neutralize radio-activity. This will make nuclear power plants much, much safer in the future.
All of this alternative energy is great but clean Nat/Gas and plenty of it should have been put to use long ago. We have a backwards Govt. it takes years to get a permit on anything unless the Sierra Club has there stamp on it. Canada Australia etc. average permits of 2 years and the USA has a 7 year permit process for any growth or improvements for energy mining etc. Just look at the Warren/Obama Oil Train that gets an extra $10.00 a barrel of oil more to transport that the traditional pipeline AKA Keystone Pipeline etc. Not to mention a derailment and the wear and tear on vehicles crossing all these RR Tracks shocks, tires etc. Now they want to export our resources to Asia /China which is rally a money maker for them, considering the interest from the loans Obama has borrowed. We indirectly are paying for there expansion through taxes. Then the Bio fuel yet another gag order because the Navy the largest fuel user in the world is forced to use the Bio Obama fuel but they do not put the price per gallon on that wonder why. We are our own worst enemy and the average voter drinking water out of there plastic bottle thinks that is clean, how does the plastic get produced. Pipelines infrastructure what is in better condition our water and sanitary or our fuel pipelines. So yes the advancement of new technologies is great but to waste what we have now and then take the profit for the R@D for new technologies could be funded a whole lot wiser if we used what we already have efficiently. Very backwards is the political budgeting for any advancement . But we should not worry we are self insured we have printing presses that help inflation is what this administration has brainwashed the voters watching tv waiting for the Govt. checks.
I am a CSP Solar Patent holder, but the absence of a detailed comprehensive Energy Plan has left me at a loss of what we are attempting to accomplish. According to a document from the California Energy Commission to the California Public Utilities Commission last year said California Currently had 30% excess electrical capacity. Also I haven't seen any report that addresses the population growth aspect of Renewable Energy if to mitigate or prevent Climate Change. The world population is currently 7 billion people and the last billion came on board between 1999 and 2011. The average individual carbon foot print is 4 tons of CO2/yr (US 20 tons/yr). Simply, the world cannot build enough RE facilities nor is there a need for that much electrical energy to offset population growth alone let alone all the other sources of Green House Gases without a drastic change in living standards.
I am an electrical engineer (masters degree). I looked into solar and wind supplements for my residence – as i am on a fairly high ridge that is quite windy (i thought). It turned out that: living on the east coast as i do (and NOT in central Nevada), and considering the cost of solar cells, i could generate usable power only about 20% to 30% of the time. My payback period – assuming NO maintenance was required – was about 60 to 80 years. I built a monitor system to measure and record my wind. Buildable generators will generate usable power only between about 40 to 45 mph wind speed, and start to fly apart above 60 mph – requiring "spoilers" or brakes to waste energy to prevent destruction. My break even point (again assuming no maintenance was required over the lifespan) was about 72 years. These payback periods exceed my life expectation by at least 3:1. Needless to say, i've dropped the idea. Cheers.
Solar is a great technology, but right now it costs about $1.00 per watt and is only economical in areas that get 6 hours of direct sunlight per day or more. In these areas, if electricity is $0.06 per kwh the break-even point is 10 years.
Solar is following a Moore's Law Progression…halving in cost every 2 years, and increasing in efficiency by about 1% a year. By 2015 solar will become the most cost-effective form of energy in the sun-belt. In 2020 it will be cost effective for use in the temperate zone. By 2030 it will be the cheapest form of energy anywhere.
Energy Storage is following a similar, but slower progression. Fuel-storage and Batteries will become viable for grid-scale use by 2020, and individual use by 2030. Until then, solar will require some kind of backup generation during the night and cloudy days…my chips are on fuel cells.