Tuesday, November 6, 2012

Common Senselessness

We don't know who the guy leading the conga
 is either. We just love to dance! Hey!
"And, of course, if you pay higher tariffs in a feed-in tariff system [like Germany] without a cap, you will get more and faster deployment. That’s just common sense."

Be careful what you write on a blank check. It should be common sense to recognize there is a cap on the FiT program in Germany even if the politicians say there isn't. Consumers will only pay so much for electricity, lip stick, stockings, high heels, hand cuffs etc. Had the FiT architects in Germany not lowered the FiT these last three years with extraordinary unplanned cuts we can imagine there would have been an extra 15 GW of photoelectrics installed. If this had occured it would have added another 5 cents/kWh to the electricity price hikes we've seen already - that's 175 Euro per home per year more for electricity. Those extra costs would have tipped many consumers over a threshold from being for the FiT to being against it. Whether today or tomorrow eventually the added costs lead to a backlash and the system breaks. This is how the world works.

The FiTs in Germany and elsewhere have budgets just like the tax equity market in the US and utility level incentive programs in Florida. Once you realize this you can see that carefully lowering the incremental incentive neccessarily leads to more PE if you can keep the investment attractive.

Marx Brothers Break...
If you divide a dividend by a decreasing divisor you get a larger quotient. Myeah see... Wise up... This is child's play for children. Later on there'll be a lesson in multiplication if  you know what I mean sweetheart. *wink wink* Skedaddle now you and tell all your friends about it.
The only way to simultaneously lower an incentive and keep the investment attractive is to also lower the costs of the underlying product. Fortunately, the predictions of the learning curve have come through as promised - like magic clockwork. Ultimately the goal is reducing the FiT down to where it doesn't impact budgets much at all. Interestingly enough, the math indicates Germany is now in a position to achieve this. If only this were common sense.

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