Which Trends Are Shaping The PV Market of Tomorrow In Germany?
Which trends are shaping the PV market of tomorrow? Where are the legislation and marketing models in Germany headed? Find out what expansion can be expected and whether or not an investment is worthwhile.
A peek at the market for commercial PV systems reveals an astonishing development: in just two decades, a technology subsidy and a great deal of commitment have resulted in the world’s cheapest source of electricity.
Since the start of the 21st century, the field of photovoltaics has made immense progress and has now reached technological maturity. The output of a standard PV module per square metre has increased from 130 to 220 Wp/m2, and costs have at the same time fallen dramatically: at the end of the 1990s, 1 kWp of installed power cost the equivalent of €12,000 – today, under favourable circumstances, it costs €500. Self-produced solar power is now significantly cheaper than the electricity mixes offered by energy suppliers. Political debates on “expansion caps” belong with the relics of the past, because today Germany’s electricity prices have been lowered by new PV systems.
A PV system can be installed on almost any roof in Germany. Using your own solar power saves on energy costs and grants you independence from the economic cycle and fluctuating energy prices. Companies can also improve their own sustainability performance with a photovoltaic system and work towards the fulfilment of ESG (Environmental, Social, Governance) criteria.
For investors, photovoltaic systems are a stable asset, and one that usually opens up tax leeway. When properly planned and managed, risks such as possible losses or even failures can be largely minimised. And because photovoltaics in Germany allow for a wide variety of design options that go beyond solar technology, they are also attractive as a direct investment.
For those without a roof at their disposal, there is also a growing market of diverse ways to claim a stake. This diversity often includes suitable options to fit each individual situation and risk-return profile.
Expansion pressure from climate targets
Environmental protection is no longer just a suggestion: it is enshrined in law – both nationally and internationally. The newly adopted European Climate Law defines the legally binding target: climate neutrality in Europe by 2050. The revised Federal Climate Change Act (Bundes-Klimaschutzgesetz) provides for this by (likely) 2045. Clear paths of reduction have been defined for the individual energy sectors – the energy industry, construction, mobility, manufacturing and more.
This law is also the basis for the national CO2 prices that have been added to European emissions trading since the start of 2021. Additionally, further tightening of the measures for achieving the CO2 reduction paths currently in force in Germany can be expected. This should also be motivated by the European Green Deal, under which EU greenhouse gas emissions must fall by at least 55% below 1990 levels by 2030. The former target was 40% below.
It is to be expected that environmentally-friendly, electricity-based processes have an increasingly important role to play. The Federal Climate Change Act obliges all sectors to make reductions in greenhouse gas emissions: as renewable and cost-efficient energy sources, photovoltaics and wind power as well-equipped to meet this growing demand for electricity. They will also greatly shape the future supply of space and process heating, along with energy flows in production facilities and the transformation of mobility.
Photovoltaics: the most economical power source
Photovoltaics delivers, and has so far always delivered, all performance promises. Today, it is low-cost, environmentally friendly, and can be scaled to size. It is cheaper than all other renewable energies. These days, fossil fuel power plants can no longer be economically justified. When combined with the storage options that can be used on-site or on the energy market, the promise of a reliable power supply is also realised.
In Germany, a significant acceleration of expansion can be expected in a few years, up to the range of double-digit gigawatts per year, which in turn will be accompanied by an increase in storage capacity. This development is driven by the low production costs of solar power. The replacement of fossil fuels will be reinforced by CO2 prices, which may again be raised. Solar power also increases flexibility value and stimulates the expansion of environmentally-friendly interfaces in other energy sectors – both in the overall system and in individual solutions on site.
Anyone looking to contribute to the acceleration of expansion and profit from it are operating in a technical growth market. As an asset class, photovoltaics offers a balanced risk-return profile and plays a key role in the greater transformation of the energy sector that lies ahead.
Trends in electricity marketing
Feed-in tariffs or direct marketing premiums are no longer the only ways to generate revenue with photovoltaic systems: your own solar power is cheaper and can therefore reduce the costs of purchasing electricity. The replacement of other energy sources with PV electricity is also becoming a significant factor, something that is particularly true with a long-term perspective of PV investments, which can have a time frame of 20 to 30 years.
To be deterred by falling feed-in tariffs is to be too short-sighted. The technology, component and system costs of PV systems are still dropping. At the same time, the market links of all systems will improve – with and without own consumption.
The value of marketed PV electricity is currently increasing: another consequence of rising CO2 prices. Even if there is still room for improvement in market access for PV systems, in well-constructed energy markets higher revenues can most certainly be achieved in direct marketing than is the case with the current payments under the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG).
This is especially true if the entire period of operation of a photovoltaic system is taken into consideration. This decade will see the transition to both commercial and subsidy-free operation of new systems. This is already the case for large PV solar parks. With subsidies left behind, the possibilities for electricity marketing tend to expand.
The importance of new marketing concepts increases, even if some marketing channels are not yet usable or are still comparatively uneconomical. The EEG therefore continues to provide an important basis for sound investments with its guaranteed purchase and remuneration, by continuing to take on the function of a safeguard.
The type of photovoltaic investment that ideally matches the investor’s individual expectations and preferences – from direct investments in a new system, to shareholding and purchasing systems on the secondary market – always requires careful analysis. A properly planned, tested, and implemented investment in a commercial PV system is advisable for environmental and sustainability reasons, while also being lucrative for the investors themselves.
Photovoltaics in Germany: are they worth it?
In Germany, the returns on photovoltaic systems are currently in the mid single-digit percentage range. They can be achieved over 20 to 30 years. Moreover, PV investments can be made in almost any size.
This article was produced with the support of Bernhard Strohmayer, Head of Renewable Energies at the Association of Energy Market Innovators (Bundesverband Neue Energiewirtschaft, bne).
This article was published in our investment guide. For all other articles and information on Direct investment in commercial-sized photovoltaic systems, please visit: Milk the Sun – PV Investment Guide.