Questions & Answers

When will renewables pay for themselves?

They increasingly do now. The differential cost of renewables is currently peaking, so renewables are expected to help stabilize power prices within the decade. Only countries that undergo an energy transition – like Germany – will be able to stabilize their energy prices and avoid high price fluctuations within the foreseeable future.

In 2014, German research center Fraunhofer IWES published a study which found that Germany is currently making investments into renewables that will eventually pay for themselves by offsetting conventional energy. The breakeven point was expected to come around 2030 but that day has already arrived: India is currently abandoning plans for new coal plants in favor of wind and solar - based partly on cost.

Yet one thing is clear: the Energiewende will not be free. There is a wide array of factors that determine the cost; it is not just renewables and feed-in tariffs. And while the Renewable Energy Sources Act (EEG) of 2014 costs around 24 billion euros annually, wind power has long been relatively inexpensive, and the cost of solar continues to plummet. Going forward, the cost increases are expected to taper off, and by 2020 a lot of old systems will no longer be eligible for feed-in tariffs. By 2030, large amounts of solar arrays will also no longer be eligible for the 20-year feed-in tariff, but they will remain operational, so Germany will begin to have free legacy solar power. During the interim, the goal must be to keep the costs in check as further growth of renewables is ensured.

The forecast increase in the retail rate in Germany is not unusual. In July 2012, French energy regulator CRE announced that the retail rate in France is expected to rise by nearly 50 percent by 2020 due not only to the greater deployment of renewables, but also to the rising cost of nuclear. At the end of 2013, CRE announced a 5 percent rate increase with annual price hikes in the coming years as well. The forecasts for Germany are relatively stable retail rates of the next few years.