Feed-in tariffs are not suppressing innovation in Germany or the UK

George Monbiot is still trying wage class war on a false premise
Jeremy Leggett
guardian.co.uk, Thursday 18 March 2010 10.40 GMT


The Energy Roof at the Vauxhall Cross bus interchange in London uses Solarcentury technology
George Monbiot's third article on government grants for domestic solar panels ignores the errors that I and others have protested about in the opening assertion in his first article. He alleged that the UK government's feed-in tariff regime is "about to transfer £8.6bn from the poor to the middle classes". In saying that, he managed to get three things wrong. The actual sum raised from the tariff levy from all electricity consumers, not just households, to 2030 will be £6.7bn; it will be spread over 20 years; and it will be more than offset – if the government is true to its word – by energy efficiency savings stimulated in parallel market-building schemes.
Yet we see no retraction in George's latest, much less an apology for trying to turn feed-in tariffs into a new form of class war on a false premise.
That was just where the problems began in the first article. In his third, he rewords many of his original mistaken views. I address those one by one on my website.
The main new item in George's latest involves using a report from what he calls the "Ruhr University" to back his assault on the German feed-in tariff programme. He did not tell his readers – maybe he didn't know – that this study's "editorial office" is RWI, an organisation well known for being a thinktank helpful to the big German energy companies. There is an irony in a campaigner such as George deploying arguments against other campaigners using such a source. Elsewhere in his article George declares that "I detest the big energy companies that give us our electricity".
Here is what the German ministry for environment, nature conservation and nuclear safety has to say about RWI's arguments against the feed-in tariffs (or the EEG, as they are known in Germany): "Whereas the International Energy Agency and the European Commission comment that the EEG is an effective and efficient tool, and dozens of countries in the EU and beyond are following the German example, RWI remains stuck in its old way of thinking."
One of George's restated arguments, echoing RWI, is that
"we have to ensure that we get the biggest available bang for our buck: in other words the greatest cut in greenhouse gas production from the money we spend."
Let me reword my original retort, which he chooses to ignore. We need to think about how the photovoltaic (PV) bang for buck changes over time as economies of scale reduce costs, and we need to think about spawning a mix of survival technologies, not just one or two that happen to be the cheapest in March 2010.
Then there is the question of the relative investments in the feed-in regime and other carbon-cutting options, compared to the prize available. If government and business do nothing together to make the UK solar and other tariffs cost-neutral as promised – an unlikely assumption - the tariffs for all technologies will add a few hundred million pounds a year to the nation's electricity bills. Other forms of energy market support will add billions per year to taxpayers bills, with little or no chance of being rendered cost-neutral. Nuclear waste alone will add more than £3bn a year.
I asked Dr Rob Gross, a director of the UK Energy Research Centre and co-author of an immense study for the UK government on the cost-effectiveness of low-carbon technologies, to comment on George's latest. He said: "It is obvious to anyone who knows anything at all about technologies and innovation that PV is one of the most promising in terms of long run cost reductions … The impact of feed-in tariffs on consumers will be very small compared to the cost of big investments in CCS, grid, nuclear and offshore."
George argues that the German feed-in tariffs have done little to stimulate innovation in the German solar industry.
"In fact, the (Ruhr) paper shows the scheme has stimulated massive demand for old, clunky solar cells at the expense of better models beginning to come onto the market."
If George had ever visited a German solar factory, he would have seen plenty of innovation under way. When he speaks of "clunky old cells" he offers a telling insight into how little he understands of what is going on in the PV industry.
I asked Professor Eicke Weber, director of the Fraunhofer Institute, Germany's premier solar research institute, to comment on George's argument that research and development was preferable to feed-in tariffs. Weber responded that it is vital to understand that "the decreasing prices of PV are driven down not merely by R&D but rather by the increasing market. The learning curve is cost versus total installed volume and shows … that with each doubling of the globally installed volume, the price comes down by about 20%. This is of course driven by progress in R&D, but this is driven very strongly by market forces".
If we waited until R&D had produced PV capable of generating electricity at today's prices, says Weber, "it would never happen".
There has been innovation in the German PV industry, and there will be yet more, leading to further incremental improvements in efficiency, design and delivery. But that is always the case in a business revolution. If one had waited for improvements to end in the digital revolution one would still be waiting. So it will be in the solar revolution.
George sees little scope for German export of PV, and
"the UK's prospects of building the major export industry Jeremy dreams of are even slighter, as it will now have to take on Germany as well as China and Japan. We've missed the boat by years".The amount of solar PV installed around the world in 2009, despite the fast growth of the PV industry, was a mere 7 gigawatts last year: the equivalent of around seven typical coal-fired power plants. To say that the UK could not catch up with other nations if we had the will to develop a domestic industry, in a global market still this small, is plainly wrong.
Today, in a UK PV market a fraction of 1% the size of the German one, we already have a PV export industry of sorts. Crystallox manufactures ingots and wafers – the raw materials for cells - and exports worldwide. Sharp and Romag manufacture modules for export beyond the currently small domestic market. My company, Solarcentury, manufactures PV tiles and slates for the domestic market and export into Europe. George has ignored all Solarcentury's invitations to visit and see all this. If he had, he would appreciate that there is plenty of scope for British companies to expand into this industry.
The most eminent venture capitalist in Silicon Valley, Vinod Khosla, recently said the place will have to be named "Solar Valley" within 10 years. This is because the practitioners of the digital revolution are switching en masse into the embryonic solar revolution in the factories that are springing up around Sunnyvale. Given our national design and technology skills, what's to stop a big slug of that revolution being sited in the UK?
George makes much of the fact that Asian manufacturers are now exporting cheap PV into Germany. True, the Germans are under great pricing pressure now from the industries they have themselves helped create, with their attractive domestic feed-in tariff, in Asia. But that is globalisation at work. Whether this is a good idea, in a world approaching peak oil, is a whole other debate, and one wherein George and I might find a lot to agree on. But peak oil and the downsides of globalisation actually provide another compelling reason for trying as hard as we can to develop a variety of fully-integrated domestic renewables industries in the UK. And for that we will need feed-in tariffs, for a while.
Finally, let me comment on George's premise that anyone who has entered the world of business cannot be trusted, or should have their views discounted compared to "independents" such as himself. "I have no horses in this race," George announces, "I have no products to sell."
If we believe in the horrors that await a world making little or no effort to cut greenhouse-gas emissions, we all have to back horses. I have gone so far as to set up a company and a charity to back one of my (numerous) favoured horses. As George put it in his book Heat,
"while I (Monbiot) sit on my backside telling people what to do, he (Leggett) spends his time doing it."That was then. Now George seeks to wear the fact that he has "no products to sell" as a badge of superior credibility. Referee!