Solar Subsidies in Germany Could See Further 29 Percent Cut Under Proposal

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By Jabeen Bhatti  

BERLIN—Two German Cabinet Ministers said Feb. 24 they will formally introduce legislation to cut subsidies for solar power by up to 29 percent within the next year.

Germany is still the world's leader in solar power with about 25,000 megawatts of installed capacity, “a success story amid the country's transformation toward renewable energies,” Environment Minister Norbert Röttgen said after announcing the cuts, backed by German Economics Minister Philipp Rösler. “We've had an enormous reduction in the subsidies over the past few years but they were clearly still too high—the costs have to be at reasonable levels.”

The legislation would amend the Renewable Energy Sources Act (EEG) and will be introduced the week of Feb. 27, the ministers said.

Solar installations last year were more than twice the forecasted new capacity, and solar energy prices plummeted by 45 percent. New solar power capacity totaled 7,500 megawatts, compared with the government's forecast of 3,000 megawatts.

The amendment aims to bring that down to 2.5 to 3.5 megawatts of new installed capacity in 2012 and 2013.

Subsidy Cuts Based on Facility Size

Owners of solar power installations are currently guaranteed an above-market price for the electricity they sell to the German energy grid in a complex subsidy support system known as feed-in tariffs.

That subsidy amounted in 2011 to €6 billion ($8.1 billion), financed through a levy of about 2 euro cents per kilowatt-hour on every household's electricity bill, according to the Ministry of Economics.

Under the proposed legislation, the rates paid for solar power would be cut in a graduated system depending on plant size, starting March 9.

Proposed cuts would range from a 20 percent reduction for small facilities to a complete elimination of the feed-in tariff for the largest facilities. Under the proposal, plants with the following capacities will be subject to:

• 10kW: 20.2 percent reduction (19.5 euro cents per kWh)

• 10kW to 1,000kW: a 25 to 29 percent reduction (up to 16.5 euro cents)

• 1,000kW to 10,000kW: 26 percent reduction (13.5 euro cents)

• larger than 10,000 kW: subsidies eliminated

In the following months, the proposal calls for further monthly cuts of 0.15 euro cents per kWh. German retail electricity prices range between 21 and 24 cents per kWh.

In addition, the government wants to limit how much energy a solar power plant can pump into the grid: a maximum of 90 percent of the solar power produced.

Bill Expected in Parliament Soon

An amended Renewable Energy Sources Act took effect Jan. 1. The law cut solar tariffs 15 percent and is set to cut them another 15 percent July 1.

The Cabinet is expected to adopt the latest amendment in late February or early March. Afterward, the bill would go to Parliament for approval, a process Röttgen hopes is quick so it prevents “a last-minute run on investors before the cuts take effect.”

The cuts “look quite substantial, but not all changes seem to make sense to me,” Matthias Lang, an attorney who specializes in energy issues at Bird & Bird's Dusseldorf office, told Bloomberg BNA. “I am wondering whether, or rather in which shape, the proposal will make it through the expedited parliamentary process.”

“The annual reduction for the coming years is low, compared to the module/component reductions that we have seen in the past. But I think it is safe to assume that the figures for 2013 onwards will be adjusted in due course,” Lang said.

Solar Industry Workers Protest

After the announcement on Feb. 23, several thousand employees of about 50 solar companies held protest rallies across the country.

“Thousands of solar industry jobs in Germany are now in jeopardy,” Carsten Koernig, managing director of the German BSW solar producers association, said in a statement. “The sector cannot handle additional cuts of between 20 to 30 percent, and this move will greatly slow down the expansion of solar power in Germany.”