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Snapshots from Germany: Hold the ideology, bring on business innovation

While the Solar Electric Power Association’s (SEPA’s) five previous international fact-finding missions were filled by representatives from American utilities, this year’s trip to Germany also included solar manufacturers, project developers, financial investors and regulators.


Such a diverse group generated some lively and positive dynamics, and our German participants immediately recognized and appreciated the high level of interaction.

“German utilities would never talk with the solar industry the way you do,” said Oliver Shäfer, president of the European Photovoltaic Industry Association. “We would never have a meeting like this in Germany.”

Shäfer was not singling out the German utilities for criticism. He said that the shortcomings of Germany’s energy transformation — known here as the Energiewende — can be laid at the feet of all participants.

“A lot of the change here has been driven by ideology,” he said. “In ideologically driven fights, a lot went wrong, and both sides have suffered.”

When Germany launched its aggressive incentives for solar in 2000, most utilities chose not to participate in the new market for solar. Some observers chalked that up to the dismissive attitudes of utilities, which did not believe that an expensive, intermittent power source could be relevant to their businesses. Certainly, the German government intended that the renewable energy support system would be an alternative to “business as usual.”

“People in Germany were fed up with the arrogant attitude of the big utilities in the past,” said Susanne Nies, head of distribution system operators for Eurelectric, a European association of electric utilities.

Nies FFM

Susanne Nies (left) of Eurelectric provided insights into the German electric market during SEPA’s solar fact-finding mission to Germany.

“Utilities are paying for that today,” she said, noting the significant financial losses suffered by many large German and European utilities.

The German electric market has what is called a “merit order” prioritizing solar and wind as “must-take” resources. At times of high renewable generation but low system load, conventional utility baseload plants lose almost all value.

As a result, “the core profit of the utility industry is declining,” said Nies.


In what she described as “the battle between ‘small is beautiful’ and ‘big is ugly,'” utilities so far are stuck on the losing side, though they are trying to change.

While Eurelectric forecasts that income from conventional generation will continue to decline, Nies said that utilities are looking at growth areas with more promising investment prospects. Likely possibilities include renewables, smart-grid investments and other grid upgrades, and “downstream” activities, a catch-all term that in Europe covers energy efficiency, electric vehicles and other grid services that benefit the end customer.

Shäfer agreed that utilities “need to be closer to their customers.”

The solar industry, he said, “must change the way we behave, with less focus on ideology and more on driving innovation on the business side.”