Photovoltaics is the term for solar panels that generate electricity. Solar thermal produces heat, such as for hot water supply or space heating. Solar heat can also be used to generate electricity in a technology called concentrated solar power (CSP), though the technology is mainly useful in deserts, not in Germany.
Though not known to be particularly sunny, Germany developed one of the largest solar photovoltaics markets in the world. The price of photovoltaics has plummeted over the past two decades, more than for any other type of renewable energy, and experts believe that it will be competitive with coal power sometime in the next decade. Already, solar power can provide up to 50 percent of German power demand for a few hours on sunny days of low power consumption. In July 2015, the electricity production from PV was, for the first time, higher than from nuclear power. But the German example shows that power markets will need to be redesigned for solar to go further because solar drives down wholesale power rates, making backup power plants increasingly unprofitable.
Photovoltaics (PV) is what most people think of when they hear the word "solar." While PV has long been considered the most expensive type of renewable power widely used commercially, prices have plummeted in the past few years (by roughly 70 percent from 2008 to 2015), and PV is now cheaper than concentrated solar power and offshore wind power.
In absolute terms, Germany has more PV installed than any other country except China (roughly 39 gigawatts at the end of 2015), but perhaps the most important comparison is installed PV in relation to peak summer demand. After all, the most solar power is generated on summer afternoons.
In Germany, power demand is lower in the summer than in the winter because Germans can largely do without air conditioning in the summer, whereas a lot of electricity is needed in the winter for heat, lighting, etc. On June 6, 2014, German solar production reached an all-time peak at 24.2 gigawatts, peaking at a third of total power demand, though solar power only made up around a sixth of power demand for the day as a whole. In April 2015, a new record was set at 27.3 gigawatts.
For years, proponents of photovoltaics have pointed out how production of solar power coincides with peak power demand around lunchtime, so that relatively expensive photovoltaics turns out to be a good way of offsetting even more expensive power generators to meet that peak demand. Almost everywhere, PV is still an excellent way to meet peak demand – everywhere except Germany, that is, for the country now has so much PV installed that peak demand is no longer an issue. Photovoltaics now offsets a large chunk of the medium load during the summer in Germany and can even offset a bit of baseload production.
One result of all of this solar power is drastically lower profits for the country's conventional power plant owners, whose plants are now simply no longer able to run at full capacity; in addition, they cannot sell at such high prices because PV obliterates the need for peak power at noontime. All of this has come about so quickly that politicians are now looking for ways to redesign the German power market to ensure that enough generating capacity remains online and dispatchable for those hours in the winter when Germany reaches its absolute peak power demand for the year (around 80 gigawatts), which also happens to be a time when no solar power at all is available. In this respect, Germany offers a unique glimpse into the future for other countries.
On the shortest day of 2015, Germany's installed PV capacity still managed to produce around 7 gigawatts - as much power as five large nuclear reactors - for two hours, thereby helping to offset peak demand for power.