Germany makes deep cut to solar subsidy with two weeks' notice

Germany’s solar industry is today expected to stage a major public protest, after the government announced record cuts to feed-in tariff (FiTs) incentives designed to curb a boom in new installations.

Environment minister Norbert Roettgen yesterday unveiled plans to accelerate a programme of cuts to the subsidy scheme for solar electricity, following a parliamentary debate on Wednesday.

The government currently uses a system of scheduled cuts to tariff levels in order to ensure the scheme’s payments remain in line with the falling costs of technology.

However, ministers are now concerned the scale of installations has overtaken its renewable energy targets and Roettgen yesterday announced plans to cut tariffs by between 20.2 per cent and 29 per cent from 9 March – four months earlier than the originally scheduled July reduction.

He also said that under the proposals incentives would be cut more frequently in the future. Tariffs would be cut by €0.15 every month from May until the end of the year.

Under the new rates, the government is proposing to pay €0.135/kWh for ground-mounted solar farms with a capacity of 10MW or less, and for rooftop installations that are 1MW-10MW in size. Any plant with a capacity bigger than 10MW registered after July 1 would not receive the subsidy.

Rooftop schemes with a capacity of less than 1MW are expected to receive €0.165/kWh and those with less than 10 kilowatts will get €0.195/kWh.

Roettgen told reporters that while Germany’s solar subsidy scheme had proven highly successful, sparking a boom in installations that resulted in significant cost reductions, it would only continue to work if the scheme was reformed.

Germany has installed 7.5GW of capacity annually in the past two years, but the government expects the new rates will reduce that volume to 2.5-3GW per year in 2012 and 2013.

However, the drastic scale of the cuts has caused anger across much of the solar industry, with firms arguing that the surprise changes will damage investor confidence and lead to a contraction of the market. A protest of 50 organisations is planned today, including leading firms Solarworld and SMA Solar Technology.

The move follows similar solar subsidy cuts by the UK, Italian and French governments over the past 12 months, all designed to keep subsidies in line with the falling cost of solar electricity.

The UK government is currently appealing against two court rulings that branded its own plans to rush through its initial programme of cuts as unlawful.

Commenting on the German government’s plan, British Climate Change Minister Greg Barker noted the huge scale of the cuts, hinting that they demonstrated that other countries were taking a similar approach to that adopted by the UK.

“Massive changes announced today to solar FiTs in Germany, ” he wrote on Twitter. “Big cuts to tariff announced with 2 weeks’ notice.”

He added he was working with the UK’s solar industry on current proposals for a mechanism for reducing incentives in the future, which he said would “create best FiT in Europe”.

However, critics of the government within the solar industry have consistently argued that the size and maturity of the German solar market means it is better placed to cope with falling incentives.

In related news, the UK’s solar industry this week celebrated passing the 1GW milestone of installed capacity.

According to the Guardian, solar capacity passed the 1GW mark on Wednesday, largely as a result of the success of the FiT scheme.

The news was welcomed by solar industry players, who said it should now be included on the list of key technologies which could help the government meet its renewable energy goals.

“Solar really deserves recognition in the government’s renewable energy strategy now,” said Gaynor Hartnell, chief executive of the Renewable Energy Association.

“With the price coming down like it is, there is no reason for it not to fill a prominent part in UK energy for 2020 and beyond. It needs re-examining in light of this milestone.”

However, Howard Johns, chairman of the Solar Trade Association warned future growth could be derailed by the government’s accelerated programme of FiT cuts.

Writing on Twitter he said: “Feed-in tariff sees solar panel installation breakthrough… 1GW total compared to 7.5GW last yr in Germany.”

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