Germany to cut subsidies for solar power

The German government is planning to cut subsidies for solar-power installations by up to 30 per cent to reform a dysfunctional price regime that has left consumers footing a rising bill for an excess of sun-powered generation.

In a blow to a solar industry wracked by global oversupply, government officials said new large solar installations would see the guaranteed price for their electricity fall by 30 per cent to 13.5 cents per kilowatt hour, and the feed-in tariffs for small new plants by 20 per cent to 19.5 cents.
The government plans to double a 15 per cent cut agreed last year, and bring it forward to April from July. Last year’s first moves to reform the regime did little to discourage investors from taking advantage of price guarantees extending up to 20 years, leading to the installation of 7.5 gigawatts of solar panels, twice the government’s forecast.

As a result, some €8bn in subsidies flowed to the owners of solar-power installations, pushing up the surcharge paid by consumers and businesses, which is meant to fund the renewable-energy subsidies.

According to the OECD, Germans pay 0.25 per cent of gross domestic product to generate about 20 per cent of electricity from renewable sources, while Danish subsidies run at about half that rate to generate 30 per cent of electricity.

Critics of the scheme, including Philipp Rösler, economics minister, complained that the regime sapped subsidies from other, more promising renewable-energy sources like wind power, which Berlin is banking on as it attempts to phase out nuclear power by 2022.

Over the past weeks, Mr Rösler had demanded that the government cap solar installations at 1GW per year in order to leave more room in the subsidy system for wind-farm operators.

But supporters, like Norbert Röttgen, environment minister, warned too radical a change to the regime could stop solar-energy investments just as Germany needs them most – installations last year were equivalent in capacity to six nuclear power stations.

A decade of solar subsidies has created a big solar industry in Germany. It is already being buffeted by a crisis of the sector worldwide, which is threatening thousands of jobs, many in economically depressed eastern Germany.

The agreement between the two ministers, to be presented on Thursday, saw Mr Rösler drop his demand for an installation cap, but also saw Mr Röttgen, considered the “greenest” minister, give some ground on reductions.

There will also be changes to cuts in feed-in tariffs, which kick in as plants age. Instead of cutting guarantees once a year, smaller cuts will happen on a monthly basis, a move to stop the traditional surge in year-end installations.

In addition, not all electricity from new plants will qualify for guaranteed prices. Depending on the size of the plant, owners will be expected to use 10-15 per cent of their electricity themselves, or sell it at lower market prices.

 FT