Solar Power » Market

Policy Framework for Solar Power

National governments and international organisations are increasingly concerned about energy security, climate change caused by fossile fuels, energy poverty and the future of energy supply in general. With the availability of solar radiation, solar electricity looks very attractive. However, with the exception of some remote locations, the cost of solar electricity is still prohibitive in comparison to many other options. See comparison chart.

Targets for Renewable Energy

EU Renewable Targets

European Union

In 2008, the EU has set out its 20-20-20 for 2020 directive, setting EU- wide targets for 20% reduction in greenhouse gasses, 20% energy efficiency savings and also 20% of electricity to be generated from renewable sources.

As some member states have achieved the EU-wide target already (Sweden, for instance), while others are further away, members have received individual targets so that the sum of all would lead to the overall 20% renewable target. In the meantime, some countries have set themselves voluntarily higher targets already.

Given the imature supply chain in the renewables industry, it will take a major effort for countries like the UK that have ambitious targets.

Whether all the targets will be achieved or remain aspirational, they will no doubt spur governments into action. A danger fo solar electricity could be that other renewable technologies are favoured for short-term benefits or that nuclear is re-classified as "renewable" just to meet the target on paper. However, in general, targets like these are good news for solar.

Other Countries

There are many other countries that have set renewable energy targets.

Country to 2010 to 2020 and beyond
Australia 9.5TWh of electricity annually  
China   1,800MW installed solar capacity by 2020 (up from 100MW at end of 2008). Recent plans are to increase targets to between 10,000 - 20,000MW!
Croatia 400MW, excluding hydro  
Dominican Republic   500MW wind
India 10% of added electric power capacity  
Korea 1.3GW of on-grid solar pv by 2011  
Mexico   4GW added by 2014
Philippines   4.7GW added by 2013
South Africa   10TWh added by 2013
Turkey 2% of electricity by 2010  
USA 5% - 30% of electricity in 26 states The American Clean Energy & Security Act 2009 states target of 20% of electricity by 2025 from renewables where 5% could come from efficiency gains.


Incentives & Regulation

While targets in EU have been adopted EU-wide, how to reach these targets is up to each member. The same is obviously true for countries outside the EU. Governmental support for solar technologies tends to be a mix of setting premium prices for solar electricity generation, tax breaks and regulation. In addition, carbon markets are used to price carbon by setting limits on emissions.

The incentive schemes and regulations for a selection of countries are outlined in the table below. We have more information on incentives for all renewable energy technologies in the renewable energy - section.

Country Feed-in Tariff Other Incentives & Regulation

Rooftop Installations (integrated or applied)

Where generated electricity is used on-site (domestic or business), owner can choose to swap to the "own-use" tariff, which hovers between € /kWh 0.12 - 0.19 depending on size (up to 500kW) and percentage of own use. If more than 30% of the generated electricity is used on site, higher own-use tariff is applied. With electricity retail price of €/kWh 0.20, the own-use tariff is a very attractive alternative.

There is a degression factor to be applied, which is in anticipation of growth in the industry and cost savings. The tariffs listed here are valid from January 2011.

Add 1% to the degression factor if annual installed power exceeds 1.5GW. Subtract 1% from degression factor if annual installed power is below 1GW.

Important: The feed-in tariff as of the date when new capacity goes on-line, is fixed for 20 years, and not subject to degression over the lifetime of the system.

< 30kW € /kWh 0.286

Feed-in tariffs are ultimately paid for by all customers through higher electricity prices rather than taxes.

In some states within Germany, new legislations requires new buildings as well as significant refurbishments to include renewable energy source.

30kW - 100kW € /kWh 0.272
100kW - 1MW € /kWh 0.257
> 1MW

€ /kWh 0.227

Free-standing installations

Since Octiber 2010, solar parks on farm land will no longer be supported. So-called conversion areas (e.g. ex-military or industrial) attract a slightly higher tariff than other free areas such as motorway side corridors or commercial space.
Conversion Area € /kWh 0.22
Others € /kWh 0.21
Spain Rooftop Installations € /kWh 0.34 Introduced a renewable projects register with a cap of 500MW per annum.
Ground installations € /kWh 0.32
Italy All installations € /kWh 0.49  
France Base feed-in tariff € /kWh 0.45 50% tax credit on residential installations
Commercial buildings € /kWh 0.45
Building integrated photovoltaics (new buildings) € /kWh 0.55

The UK has introduced a feed-in tariff system in April 2010 for solar pv systems up to 5MW.

It is valid of 25 years from start of operation and inflation-adjusted. The banding is stepped rather than linear (as is the case in Germany).

The tariff has an in-built degression The next degression step will be in April 2012.

Electricity that is not consumed on the premises and fed back to the grid attracts an addtional minimum £/kWh 0.03 "export tariff".


0 - 4kW £/kWh 0.413 Since 2008, no building permission is required for photovoltaics (unless for listed buildings)

Companies are able to accelerate depreciation if they want to.
4kW - 10kW £/kWh 0.361
10kW - 100kW £/kWh 0.314
100kW - 5MW £/kWh 0.293
Above 5MW, the UK does not have a fixed feed-in tariff. Instead, it has created a market of tradable so-called "Renewable Obligation Certificates" (ROCs). Generators of clean electricity are awarded ROCs. Solar electricity generators receive 2 ROCs per MWh. They can be claimed back on an annual basis. Currently ROCs trade at around £45. For comparison with other countries, this translates into € /kWh 0.1. Energy companies must meet annually increasing renewable energy targets. If they do not meet their targets, they are obligated to buy ROCs from other sources. The price for ROCs depends on its market value. As a result, unlike with feed-in tariffs the value of the subsidy is not known and therefore deters investors.
USA Feed-in tariffs only in California around $/kWh 0.35 The American Recovery & Reinvestment Act 2009 grants up to 30% of PV costs and provides for 30% investment tax credit for manufacturing equipment.

In Ontario only: CAD/kWh 0.802 from residential rooftops to 0.443 to ground mount systems that do not exceed 10MW. 20-year contracts.

South Korea For commercial facilities $/kWh 0.77  
China May introduce feed-in tariff for ground-mounted installations, anticipated to be in the region of $/kWh 0.15.  

The Carbon Market

Carbon MarketsCarbon Markets are also supporting electricity generation from renewable sources. Here, companies can buy and sell emission allowances where allowances are set either voluntarily or by governmental organisations.

Companies in need of emission allowances can either buy them in the market or invest in projects that reduce green-house gases in other developed countries as "Joint Implementations (JI)" or in developing countries as a "Clean Development Mechanism (CDM)" - project. These projects can then sell "Certified Emission Reduction (CER)" credits, which count towards overall emission targets.

The most successful carbon market is the EU- Emissions Trading System (ETS), which has grown steadily in both volume of contracts traded and value, although the increase in 2009 will be less than in previous years. However, the value of JI's in 2009 has come to a halt whilst CDM has shrunk by more than 50%. Only very few CDM- and JI- projects were related to solar electricity. Hence, the collapse of this market segment is not significant.

The American Clean Energy & Security Act 2009 introduces an emissions trading scheme with cap on 17% below 2005 levels in 2020 and 83% by 2050. The other markets are mostly voluntary and therfore fairly small in size.

ReferencesThe EU Renewables Directive
New Carbon Finance - Market Report on Carbon Markets
German Feed-in Tariff (in German only)

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