In a push to reduce reliance on natural gas, Ukraine has prioritized renewables, solar energy especially. The country offers Europe’s highest solar feed-in tariff, a subsidy that forces utilities to pay above-market prices for green electricity. With solar power, the tariff is intended to encourage investment in pricey photovoltaic (PV) panels.

Solar is booming in Ukraine as a result. Capacity will double this year, and Austria’s Activ Solar GmbH built three PV plants in the former Soviet republic in 2011. One, at 100 MW, is the largest such facility in Europe.

All good, right? Not necessarily. Many European countries have been burned by solar. Berlin, Rome, Prague and other capitals have backed off solar because the hefty incentives necessary to spur investment pushed installations above government targets, driving up electricity prices. That’s because utilities pass along the cost of solar – around four times that of energy from fossil fuels – to customers.

Solar incentive schemes can prove disastrous. Take Germany, which has offered over $130 billion in subsidies to become the “photovoltaic world champion.” Today, solar power comprises “only about 0.3 percent of Germany’s total energy,” according to environmental expert Bjorn Lomborg of the Copenhagen Consensus Center, because, well, the sun doesn’t always shine. But Germany now has the second-highest electricity prices in the developed world thanks in large part to a boom in PV installations. What about CO2 emissions? Solar hardly made a dimple.

“… by the end of the century,” Lomborg writes in a recent op-ed, “Germany’s $130 billion solar panel subsidies will have postponed temperature increases by 23 hours.”

As I write this, Berlin is slashing subsidies. The Czech Republic, which boasted Europe’s third-fastest growth in solar output two years ago, has done the same. Prague also introduced a 26 percent tax on producers to rein in costs. (The tax has faced legal challenges.)

Roughly 40 percent of Ukraine’s energy comes from natural gas, most of which is imported from Russia. The country should diversify. But doubling down on solar production before the technology is more cost-effective probably isn’t the answer.

“Germany’s experiment with subsidizing inefficient solar technology has failed,” Lomborg writes. “As even many German officials would attest, governments elsewhere cannot afford to repeat the same mistake.”

Picture of the Okhotnykovo Solar Park in Ukraine from Wikipedia

S. Adam Cardais

S. Adam Cardais is a TOL contributing editor. Email: adam.cardais@tol.org.

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