Solar Pushes Germany's Energy Costs Lower?!

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When Germany said it was closing down all of the country's nuclear plants, the assumption was that it would just make up the losses by importing nuclear energy from France. Therefore, the general thinking was that the move would have very little impact on what energy source Germany's power really came from.

But recent data has shown that renewable energy has picked up much of the slack left by shuttered nuclear plants. While Germany was cutting the cord to nuclear, manufacturers like LDK Solar (NYS: LDK) , JA Solar (NAS: JASO) , and ReneSola (NYS: SOL) have been lowering prices, making solar more attractive to installers. According to Bloomberg, seven reactors have been closed, and Germany is still a net exporter of electricity.

Another interesting trend has emerged in the last few months: falling electricity prices. Next-year contracts rose to a two-year high after Germany announced it was closing its nuclear plants, but have fallen sharply since then as wind and solar fill the void. Bloomberg expects Germany to build an additional 5,300 MW of solar and wind capacity next year and 7,000 MW more in 2013, which will squeeze out traditional electricity suppliers.

Feed-in tariff side effects
The trend of falling energy prices is an interesting side effect of the new feed-in tariff in Germany. Since wind and solar have first dibs on energy production, coal and natural gas move to the end of the line. If they're fighting over a smaller piece of the pie with the same level of capacity, it makes sense that prices would fall. But this positive side effect is rarely included in the equation of wind and solar being "too expensive."

So as residents fill their roofs with solar modules from Trina Solar (NYS: TSL) , Canadian Solar (NAS: CSIQ) , and Yingli Green Energy (NYS: YGE) they may actually be lowering Germany's overall energy bills. Who would have thought?

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At the time this article was published Fool contributor Travis Hoium owns shares of LDK Solar. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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