Proposed Cuts in German Solar Incentives Would Harm Solar Industry
Germany is the world leader in producing solar energy, so what happens in Germany has ripple effects throughout the global solar industry. When Germany's solar industry hiccups, the world takes note.
Germany's Economy Ministry proposed a plan on Thursday last week to reduce the maximum German solar installations to 1GW. The Environment Ministry is opposed to the cuts, saying that the reductions already planned for January 2012 are enough and that these additional cuts would "starve" the German solar market.
The plan, backed by Economy Minister Phillip Rösler, proposes a cap on subsidies to installations over an aggregate of 1,000 kW (1GW) to help keep electricity prices down. Germany installed 7.4GW of solar energy last year, and is expected to install 4GW next year.
Germany's renewable energy policy contains a "breathing cap" to keep installations between 2.5GW and 3.5GW. Additions exceeding that target corridor trigger greater subsidy cuts: each year, the feed-in tariff is cut by 9%, with additional 3% cuts for exceeding the breathing cap. Next year, Germany's feed-in tariff will be cut by 15% after the country installed about 5.2GW in the year through September 2011.
The fear is an actual cap on installations. Limiting solar installations to 1GW per year could effectively "choke" the solar sector in Germany. Investors would be unwilling to install new solar energy systems because they would not know whether their installations are inside or outside the cap, and thus would not know whether they will receive incentives or not.
Michael Kauch, environmental spokesman of Rösler's Free Democratic Party, said that the legislation proposed did not explicitly contain an actual cap to installations in which no more installations can be made. "Options discussed included lowering the ‘breathing' cap's target range or implementing steeper cuts when it is breached", he said.
The Environment Ministry is opposed to such a cut and holds that the 15% feed-in tariff cut is enough to slow down installations and keep electricity costs stable at 3.5 cents per kilowatt-hour.