Much has been written about how much Germany subsidizes renewable energy and how expensive power there has become. So it might strike some as ironic that it’s growing renewable energy infrastructure could be disrupted, by well, renewable energy.
Beginning in March Toshiba will team up with Gagfah SA, the second biggest owner of German residences, to install solar power at their buildings in two cities. The initial plan is for 3 megawatts scaling to 100 megawatts by 2016.
The reason Toshiba sees an opportunity here is that purchasing power from utilities has grown so expensive in Germany that the company thinks it can build and install distributed power at a lower cost for customers than those customers pay utilities. This isn’t terribly different than places like Hawaii and California where rooftop solar is often cheaper than grid power.
But this is the first I’m seeing of large corporations getting involved as competitors in microgrid type installations in the developed world. This could become yet another headache for utilities as they see power generation revenue slowly erode. It also blows the market wide open as private companies can start to assess whether they can produce solar power at lower cost than utilities can, without the costs associated with long haul transmission.
Germany is ideal for this type of plan, mainly because there are so many renters there. The culture is very different in Germany around renting because much more people there choose to rent over the course of their lives instead of buying. In this vein, renters will often spend considerable amounts of money making a place their own, doing things like painting and replacing flooring since they see themselves as long term renters. Now for the companies that manage these types of buildings, being able to offer cost competitive power rates could give the building owners a way to distinguish themselves, particularly given how much the Germans are now paying for electricity.
Germans now pay the second highest electricity rates in Europe and the prices they pay have accelerated. In 2011, they paid 25 cents per kilowatt hour. This year that figure reached 29 cents per kilowatt hour. The cause of rising energy costs in Germany is largely related to extensive feed-in-tariffs that have made the country a renewable energy leader, and helped it move off nuclear power. The policy has also created a mild backlash owing to the tens of billions of euros Germany has spent subsidizing solar. The only country paying more for household electricity is Denmark at 30 cents per kilowatt hour. The average of the EU-28 countries is 20 cents per kilowatt-hour, still relatively high compared to places like the U.S.
Even more interesting is that Toshiba will buy power in the wholesale market, since there’ll be a need for power at night. Toshiba has promised to sell this power to residents at the same rate as solar power. Toshiba has also indicated that it could go off the grid completely by adding battery storage to capture excess solar during the day and sell it back at night.
In the end there’s a lot to like about this model. Toshiba cuts out costs related to long haul energy transmission that is a facet of solar power generation, since solar power must often be located at a distance from where the power is consumed. Additionally, one of the challenges of rooftop solar at a residential level is the soft costs related to marketing to individuals. This effectively makes the decision for a large group of people and cuts out those costs.
This type of model would struggle in a place like the U.S. with so many individual homes but Toshiba already has its eye on Italy and parts of Asia, believing it can offer a cheaper alternative to grid power. It marks yet another step in the disruption of power generation as utilities will have to contend with new competitors.