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Last Updated: Thursday, 10 January 2008, 18:00 GMT
Germany's sunny revolution
By Caroline Bayley
BBC Radio 4

On a bleak airfield 30km (19 miles) outside Leipzig in former East Germany, a quiet but sunny revolution is taking place.

Solar panels
The panels are in areas not known for their constant sunshine

Derelict, communist-era barracks give way to hectares of solar arrays, lined up, row upon row, like a sea of gleaming plasma TV screens.

This is the heart of Germany's solar industry and, although still under construction, once complete it will be the world's largest solar power station, covering the equivalent of 200 football pitches and providing enough electricity for 10,000 homes.

Germany is the world leader in solar energy: building power stations across the country, developing the technology and manufacturing solar panels.

One in a hundred homes has gone as far as installing its own solar arrays.

This new industry is based in the former, communist East, where unemployment is still in double figures and new solar panel factories are bringing much-needed employment.

World leader

Germany has done this before. Over the past 25 years, it has built up wind power and is a world leader in that as well.

There are even claims that by 2050, Germany could derive all its energy from renewables.

The European Union has set a target for its member countries: 20% renewable energy by 2020.

Germany is already more than half way there. In Britain we are trailing behind with between 4 and 5% of our energy coming from renewables.

But why is solar power happening in Germany, which is not normally considered to be one of the world's top sun spots?

This is easily the best way to promote a market. We're in the process of missing out in the UK
Jeremy Leggett, Solar Century

Christian Hinsch of Juwi, the company building and running the power station near Leipzig, says that this part of Germany is sunny and he says there is plenty of room for solar power stations, particularly in the East.

Fixed price

Most importantly, there is a market mechanism in place, which gives suppliers of solar electricity a guaranteed price for the energy they supply to the national grid set for 20 years.

"If you put up a wind turbine, if you put up a bio-gas power plant or if you put up a solar power plant, then you get a fixed price for 20 years, depending of course on the size and type of renewable," he says.

It is called the "feed-in" tariff and it is considerably higher than the price paid for fossil fuel electricity.

It is paid to commercial providers, such as power stations, but also to householders who connect their own solar panels to the national grid.

The tariff they receive is even more generous than the price paid to the big producers - currently more than double the price of conventional electricity.

Almost 400,000 homes in Germany, particularly in the sunnier south of the country, have installed solar panels.

Consumers pay

However, as Gerhard Stry-Hipp, managing director of the German Solar Industry Association says, this is not paid for by the government.

"It's not a subsidy in a formal way because it's not state money. The utilities are gathering that money and there is an additional bonus the rate payers [consumers] have to pay and with this money, the electricity from the renewables is paid."

Solar panels
Renewable investment has been big in high unemployment areas

This has been imposed through legislation and since 2000 there has been a greater emphasis on encouraging solar power by offering a higher tariff than for wind, which is now well established.

An additional element of the "feed-in" mechanism is an annual reduction of 5% in the rate set for the next 20 years.

So it encourages people to get in early and benefit from a higher 20-year rate, because the rate you start at is the one you keep for the full 20 years.

'Solar valley'

What this has also done is to encourage German industry, which is the world leader in the manufacturer of solar panels for homes and power stations, to reduce its own costs every year.

The former East Germany now has its own "solar valley" around Leipzig, where solar panel manufacturing plants have sprung up.

In Frankfurt-an-der-Oder, the "other" Frankfurt, right on the Polish border, there is another nest of solar manufacturing.

Unemployment in the region is running at 17% and new factories, such as Conergy's integrated solar panel plant on the outskirts of town, are providing a lifeline to the town.

It was once a centre for the microchip industry, so has a well-skilled home-grown workforce who left in search of work when communism collapsed.

They are now returning to take up new jobs in the solar industry.

Proper jobs

"People are coming back from the West and from Berlin and from Dresden and from Frankfurt-am-Main to work here and are very happy to come back," says Gisella Wolters, the director of Conergy's new plant.

One factory worker at Conergy said it was his first proper job for four years.

When Conergy's plant is fully up and running later this year, it will produce 3,500 modules for solar panels every day.

But is there really a market for so many? Gisella Wolters is convinced there is.

"We are represented in 26 countries with Conergy, so our market is really worldwide."

In spite of Germany's obvious success in the solar industry, both the German government and industry insiders are worried that the "feed-in" tariff, which they argue is fundamental for this new sector, could be under threat from the EU.

They are holding a meeting later this month where decisions will be taken on how European member states will meet their renewables obligations.

'Effective system'

Matthias Machnig, the German environment minister responsible for alternative energy, fears that if a trading system were introduced throughout the EU, their "feed-in" tariff market mechanism could unravel.

"We don't like the debate on a certain way of bringing the renewables further on because we think feed-in systems are the most effective systems."

"Eighteen out of 27 countries in Europe have feed-in systems and feed-in tariffs and I think we should stick to this very appropriate way of pushing renewables."

However, Britain is not one of the countries that has adopted Germany's feed-in tariff system.

Jeremy Leggett, founder and chairman of Solar Century, which sells and installs solar panels would like to see it adopted here.

"This is easily the best way to promote a market," he says.

"It just gets you to the point where you can industrialise the technology, which is what they're doing and why we're in the process of missing out in the UK."

Renewable trading

But the UK Energy Minister, Malcolm Wickes, says he does not think the German system is better than Britain's own Renewables Obligation Certificate.

Under the UK system, all producers of renewable energy get a piece of paper that they can trade, allowing the electricity generators to buy renewable allowances to meet their official obligations.

He says that there is momentum behind Britain's renewables policy and that by next year, Britain will overtake Denmark as the world leader in offshore wind.

He is concerned at the idea of an extra levy on electricity customers to cover the cost of the renewable tariff.

"It's quite an expensive policy and at a time of rising energy bills and electricity and gas bills affecting businesses as well as the domestic consumer, you know, in government we have to have regard to prices."

He says the renewables obligation is a "massive incentive to investment in renewables" and that a lot of people "sometimes look abroad and say the grass is greener. I don't believe it is."

Even so, Britain has a long way to go to catch up with Germany.

To hear more about Germany's solar power success listen to IN BUSINESS with Peter Day on Radio 4 at 8.30pm, Thursday 10 January, repeated on Sunday 13 January 9.30 pm, also available as a podcast.

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