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Germany reduces solar subsidy

The German Cabinet has approved a reduction in the feed-in tariffs for solar energy.

The subsidy for new rooftop solar systems will decline by 16% and drop by 15% for ground-mounted solar parks that are constructed after 1 July. The cuts are lower than the 25% reduction originally proposed by the Environment Ministry.

Feed-in tariffs for solar panels installed on military bases and brownfields will be reduced by 11% while farmland that is converted for solar panels will receive no subsidy as of July, according to the changes.

The German Government says the reductions are needed because the price of solar electric panels has dropped by 40%, resulting in an overcapacity in the German market. It estimates that the reduced feed-in tariffs will reduce costs for electricity by €2 billion while allowing profitable investments in Germany as a result of technological developments and lower costs of production.

Federal Environment Minister Norbert Roettgen had wanted higher reductions for solar rooftop systems to take effect next month.

Cuts need final approval

The proposed cuts were agreed last month by politicians in the coalition committee of Christian Democrats and Free Democrats but must still be approved by the German Bundestag.

After the Federal election last September, the German Renewables Act 2009 revised the feed-in tariff for solar energy and the new governing coalition announced plans to reduce the subsidies. The Federal Government also plans to limit the level of new solar capacity at 3 GW per year.

The Act provides a fixed feed-in tariff for 20 years and initially promoted rooftop systems with a tariff ranging from €0.4301 to €0.33/kWh (depending on size) with ground-mounted systems receiving €0.3194. As a result, 80% of new solar capacity in Germany is on roofs.

Feed-in tariffs successful at promoting solar in Germany

The feed-in tariffs have made Germany the world's largest market for solar photovoltaic installations, accounting for half of the US$25bn global market. Last year, it added a record 3 GW of new capacity to bring its total of installed capacity to 9 GW.

Roettgen's proposal faced opposition from the centre-right coalition and environmental groups, as well as from states where solar power has flourished. BSW-Solar (the German Solar Industry Association) had expressed sharp criticism of the plan and warned that the industry will be threatened by “a wave of insolvencies and the loss of thousands of jobs.”

Shares of publicly-traded solar companies in Germany rose on news of the cuts, which involves a lower reduction than expected.

SolarWorld, the country's largest solar firm by sales, and Q-Cells, a global giant in the manufacture of solar cells, say the cuts are too steep, too fast and will destroy jobs in Germany.

The feed-in tariff was already reduced by 9% in January and has declined by 8-10% per year since the Renewable Energy Act was created in 2000. Utilities now must pay €0.39/kWh for 20 years, down from €0.57 in 2004.

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Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity