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Energy to the masses…

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When the European commission made a survey last fall about air quality and environmentally friendly energy options they made 25,525 telephone interviews in all 27 EU states. One question they asked was: “Thinking about the next 30 years, which of the following energy options do you think should be prioritized now in your country?”

Picture: 350.org

Picture: 350.org

Seven out of ten Europeans answered Renewable Energy Sources!

This is really good – Let’s do it, Let’s build it!

Can we learn from others?

Best in class – Germany

data source: BSW-Solar

data source: BSW-Solar

As of 31st of October 2012, there were 31.62 GW of photovoltaic connected to the electrical power network, and solar PV provided 18 TWh (billion kWh) of electricity in 2011. On midday of Saturday May 26, 2012, solar energy, installed within their borders, provided over 40% of total electricity consumption in Germany, and 20% for the 24h-day.

As of 2012, the German Feed in Tariff * costs about 14 billion euros per year for wind and solar installations. The FiT* cost is spread across all rate-payers in a surcharge of 3.6 €ct/kWh (0,31 SEK) Average total electricity price is 26 €ct/kWh (2,25 SEK) On the other hand, as expensive peak power plants are displaced, the price at the power exchange is reduced due to the so-called merit order.

Merit order

The merit order is a way of ranking available sources of energy, in ascending order of their short-run marginal costs of production, so that those with the lowest marginal costs are the first ones to be brought online to meet demand, and the plants with the highest marginal costs are the last to be brought on line. The pool-price is based on the peak-capacity.


The effect of renewable energy on merit order

Increasing the supply of renewable energy tends to lower the average price per unit of electricity because wind and solar energy have very low marginal costs: they do not have to pay for fuel, and the sole contributor to their marginal cost is operational cost.
As a result, their electricity is less costly than that from coal or natural gas, and transmission companies buy from them first. Moreover, solar energy is typically most abundant in the middle of the day, coinciding closely with peak demand, so that it is in the best position to displace coal and natural gas electricity when those sources are charging the highest premium. Solar and wind electricity therefore substantially reduce the amount of highly priced peak electricity that transmission companies need to buy, reducing the overall cost.
A study by the Fraunhofer Institute found that this “merit order effect” had allowed solar power to reduce the price of electricity on the German energy exchange by 10% on average and by as much as 40% in the early afternoon. In 2006, the “merit order effect” meant that the savings in electricity costs to German consumers more than offset for the support payments paid for renewable electricity generation.

Feed-in tariff

A feed-in tariff is the most effective means of developing solar power. It is the same as a power purchase agreement, but is at a much higher rate. As the industry matures, it is reduced and becomes the same as a power purchase agreement. A feed-in tariff allows investors a guaranteed return on investment – a requirement for development. A primary difference between a tax credit and a feed-in tariff is that the cost is born the year of installation with a tax credit, and is spread out over many years with a feed-in tariff. In both cases the incentive cost is distributed over all consumers.

“I´d put my money on the sun and solar energy. What a source of power! I hope we don´t have to wait ´til oil and coal run out before we tackle that.”

Said by Thomas Edison* in 1931!

No – We don’t have to wait…

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