Solar Energy Perspectives - IEA

Chapter 10: Policies
ambition of the initial programme. They totalled 62% of the added capacity, the remainder
being provided by less than 1 200 larger installations.
As a result, the supply curve seems rather flat, reflecting considerable potential at a given
cost. Controlling quantities would require a very precise price setting in an uncertain and
ever-changing economic environment. At any time, the incentive level risks being either “too
high”, not generating too-high returns to investors but driving more PV investments in PV
than wished, or “too low” and much less investment than desired will take place. The
difficulty is illustrated in Figure 10.6.
Figure 10.4 Net present value of European FITs for PV and PV system costs (USD/W)
Czech Republic
Italy
Spain
Germany
System cost
(USD/W)
Notes: As of Q2 2011, with expected tariffs for the remainder of the year. NPV calculated at 4% discount rate; system cost represents
German average and excludes impacts of value-based pricing in high FIT markets.
Source: Bloomberg New Energy Finance.
Key point
8
7
6
5
4
3
2
1
0
Q2 06
Q3 06
Q4 06
Q1 07
NPV of European feed-in tariffs for small PV systems
and average German small system cost
Frequent revisions have allowed the German FIT for PV to avoid overpayments.
Q2 07
Q3 07
Q4 07
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
One possible transitory answer to concerns about rapidly increasing costs of PV support
policies could be to “cap” the quantities – per year, per quarter, or per month – of new
capacities allowed to benefit from the FITs. Another option would be to cap the level of
annual finance commitments to the FITs. These approaches would provide policy makers
with direct control over the money fluxes, while linking any decrease in tariff level with an
increase in allowed capacities.
The PV industry tends to oppose both options, particularly on the grounds that they risk
choking off the dynamics of PV installations. They would make any PV development
uncertain, as each would depend on its place in a queue and how the queue is handled –
not an easy task for regulators either. One may wonder if regular, unscheduled tariff
changes are much better. Leaving policy makers with the option of decreasing support
levels entails the risk that these levels are inadvertently set too low and the braking ends
183
© OECD/IEA, 2011