In 2012 Germany produced 28 TWh of solar power, displacing electricity produced from natural gas and coal. This reduced emissions by about 18 Mt.
If the German success in solar power were replicated among other high-income countries, annual emissions would fall 720-1,330 Mt by 2030. If upper middle-income countries adopted solar in the same way, emissions would be reduced by 1,800-4,590 Mt. If the same uptake applied to all countries worldwide, the climate benefit would grow to a remarkable 2,490-6,170 Mt.
The expansion of solar power in Germany has been driven by the Renewable Energy Act (EEG), which entered into force in 2000. The EEG guarantees the sale of electricity from renewables and its feed-in to the grid. It also offers producers a fixed rate of remuneration called a feed-in tariff (FIT).
This has driven up the share of renewable energy in Germany’s electricity production to 25%, of which solar provides 6%. In 2013, 35 GW of solar power capacity had been installed in Germany.
It is left to German consumers to pay for the difference between the wholesale price of electricity and the remuneration rate for renewable energy. In 2014, the government reformed the EEG to curb the cost increase of further renewable energy expansion.
Other countries have used other schemes to promote solar power. These include auctions in Brazil, renewable portfolio standards and production tax credits in the US and mandatory requirements to install solar or green roofs in France.
The abatement cost is estimated at 26 $/tCO2e, assuming the price of solar power continues to decline in the future. However, when investing in solar power on a massive scale, unit costs may decline even further than anticipated. If solar power becomes even slightly cheaper than traditional power generation, the abatement cost may turn negative, at −26 $/tCO2e.
Using this wide cost range, the annual costs of scaling up solar power would reach an estimated −$35 billion to $35 billion for high-income countries by 2030, −$120 billion to $120 billion for high and upper middle-income countries and −$160 billion to $160 billion for all countries.
Solar power can cut energy costs for those consumers who can replace electricity bought from the grid. Increasing power generation with domestic, renewable sources reduces reliance on fuel imports, improving energy security.
Solar power can create and preserve jobs, in particular in installation and maintenance. In 2013, the solar industry employed 56,000 people in Germany. Solar power also has a positive impact on the local environment and health by displacing the burning of fossil fuels.
Barriers and drivers
- Solar panels have relatively high upfront investment costs. However, the costs have fallen dramatically in recent years. There are also cost-effective ways to encourage consumers to invest, such as low-interest loans or paying off debt through savings on utility bills.
- Large increases in solar generation capacity can require investments in new infrastructure, such as low-voltage networks. These costs can mean higher utility bills.
- Reaching very high shares of intermittent power generation using renewable energy may form a barrier. People need electricity at all times, so new energy storage infrastructure and increasing connectivity with other grids may be required.